or the state in whose airspace you are flying accepts you flying an N reg aircraft in their airspace on a UK issued licence.
Well, that is not what 61.3 says.
I don't see how a local airspace rule can override an FAA requirement. The FAA holds the jurisdiction over an N-reg and what licenses are required to fly it.
I suppose this one could be argued both ways though.
However, there are not many countries which specifically allow you to fly an N-reg on a UK license. Can you name any?