You may be surprised to hear me say this, but here is it -- the iPhone doesn't need GPS.
Add GPS support ... [the iPhone] would be the ultimate mapping application if it knew where you actually were at all times
They're confusing the issue. Geolocation does not mean GPS. GPS is a specific technology implementation of getting a location fix. It is also frought with complications that are most apparent in areas that people may use a mobile phone to find out what's going on around them - that being urban areas, indoors, or anywhere that doesn't have good sky coverage.
I have an N95 - that's because I'm a geo-geek. I wanted to have programmatic access to my precise location so that I could write prototype applications for mapping, geolocation, and so forth.
I am not an average user
That's still almost 1 minute from turning GPS on (which doesn't always happen automatically) to getting a location fix. That's also probably in a decently clear area. This is all well and good - now I can see a moving dot in MGMaps (though not GoogleMap yet), or precisely geotag my photos.
Another problem with GPS - it's a battery hog. I've killed my battery in several hours when using GPS, and even shorter if I leave the GPS on and indoors - leaving the processor to be constantly trying to calculate find GPS signals and parse their GOLD-codes (read more about how GPS works).
Personally, I get rather frustrated standing there (and anyone else waiting with me more so) staring at my phone, hoping for a fix so I can then take a photo. And remember, I'm a geek, I live for this pain - your average user won't.
But I want my geo-aware iPhone!
My point is, geolocation does not mean having a GPS. There are numerous methods of automatically locating yourself that doesn't require listening to satellites 24,000 miles away.
Cell Towers and WiFi are both simple, and accurate, methods of getting your location within 10 feet. This is the type of accuracy you may expect from GPS anyways. But you can get a cellular location or WiFi location in seconds - not a minute.
It also works indoors - and best of all (with respect to this post), the current revision of the iPhone has the hardware already. In fact, it would just be a software update to turn on geolocation on the iPhone.
The future is now
You can still have your geotagged photos (what's more interesting, that you were at [-23.538809, -46.618423] or SÃ£o Paulo, Brazil?), find friends in the area, local pub search, or even maps near me.