The good news is that all iPhones now do near real-time location tracking either with or without GPS. In our test our old iPhone, loaded with the 2.0 update software, updated our location approximately every 10 seconds on our trip back on the 168 to Camden Town, London, yesterday evening.
Locating via triangulation of the phone mast network and local wifi points the results were surprising accurate and certainly accurate enough for any of the new location aware apps in the iTunes store.
We were surprised to see our location updating as we moved on Google Maps to such an extent that without any actual navigation software available for the new GPS enabled iPhone we would question the need to upgrade based on a desire for locational awareness.
The accuracy of the location is determined by the density of the phone masts, so it works well in the city. We are now able to geotag our photographs, watch our location update and view services around us, all without the new iPhone.
The new 2.0 software upgrade is well worth it, for the location services alone.