How to optimize a geolocation database in mysql for euclidean distance search/query?

You'll have a hard time optimizing for that kind of query. A better option would be to compute a bounding box from the (x,y) coordinates and delta passed in. Then query for any locations where the coordinates fall in that box.

That query would be much simpler and would be able to use any indexes you might have on the x and y fields.

Maybe you could try Voronoi diagrams. Take a look here http://www.cs.sunysb.edu/~algorith/files/nearest-neighbor.shtml.

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