There are quite a lot of posts on the Apple support forums discussing whether nor not the upgrade to iPhone OS 3.0 and later releases has trashed the GPS functionality of the device.
At last count there were 24 pages, a high percentage from users in Europe who claim that moving to 3.0 eliminated GPS functions, and all they get is Wi-Fi geolocation or cellular network triangulation.
As often happens, the passion devolves to nasty comments going back and forth, but clearly, some people are having a GPS problem which Apple is not acknowledging as a bug. They are giving some people new phones, but others aren't getting them because their iPhones are out of warranty.
Here's a typical comment from one poster:
"I could not get a satellite GPS (blinking blue dot) on my iPhone, while two other phones running 3.0 like me, got it within seconds. So I returned my unit, and got it replaced. The new phone got a correct GPS signal at once and according to MotionX GPS it was correct within 8 meters.
This leads me to the conclusion that OS 3.0 makes GPS not work on some iPhones (not all). Replacing the unit was the only solution for me, and it worked.
I recommend it to anyone who never (or almost never) get a GPS satellite signal."
Some are blaming their cell service provider, others are blaming Apple. Others are saying it was fixed by the recent version 3.1 update. Of course, with any new hardware/software there are problems, and with millions sold, a lot of reports will surface. What's odd here is that some people are solving it with resets, some with new phones, others with turning 3G off. There just doesn't seem to be any consistency in the solutions, which is probably driving Apple crazy.
Hope these folks get this problem sorted out, and Apple dives in and finds a solutions, or more likely, solutions.
Thanks to Torstein in Norway for the tip