A while back, TUAW took a peek at RoqyBluetooth, a GPS solution for jailbroken iPads and iPod touches. Today, Matthias Ringwald has released BTstack GPS. Like Roqy, BTstack GPS offers integrated core location for Bluetooth-enabled devices that lack an onboard GPS system.
Retailing for $5 (via the Cydia store), BTstack GPS was written by the same developer who created BTstack, allowing iPhone OS units to communicate with external bluetooth devices including keyboards (you may be familiar with his BTstack Keyboard application), mice, Wiimotes, and now, Bluetooth GPS dongles.
The software requires you to disable Apple's Bluetooth in the settings app. You then launch the GPS app, wait for your system to detect the external GPS unit, select it, pair, and then wait again as the GPS unit finds locks to the medium orbit satellites that provide GPS data. This can take a minute or two, so be a little patient. Once the lock finishes and the GPS data starts flowing, Ringwald's app will update, showing your current location on a map.