Solution
Throw the SDK out, and let the market decide.
There will be a working GPS out for the iPhone by mid summer.
How?
Well, you make a iPhone GPS dock. For a car. Then add the GPS to the dock.
Boom! You get GPS navigation, the iPhone does the data crunching, Enlarged Google map to get you in. Celeb voices from Ratatouille do the voice overs (because Jobs hasn't plugged it enough yet)
2) Not driving? Then purchase the iPhone GPS dongle. Forerunner can do 10 hours before charging. i'd say that people usually recharge before that, or would be able to use their GPS or iPhone in an intermittent way to extend the battery until the next charge?
If Garmin can fit a GPS in the Forerunner 405 that's a nice watch size, I think a slightly enlarged iPhone could fit one in. There's nothing holding Apple back from making the iPhone in different shapes and sizes this year. They're scaling back production at the mo, Penryn chips awaiting, holdups with the Air, Tablet and other things. But, Apple will come strong on adding more things to the iPhone every month pretty much.