If someone breaks into my home and hacks into my Mac (using the OS X DVD to do a password reset), I have a lot more worries than whether they know how to find out what neighborhoods cell towers Ive used! Luckily, encrypting your iPhone backup is simple, automatic, and unbreakable; and has the added benefit that then your iPhones keychain gets included in the backup. (Otherwise it doesnt, with good reason.)
If, on the other hand, they steal my phone, theyre unlikely to stop me from remotely shredding it so fast their head spins
That said, dumping the old cached data is good practice, and Apple really needs to do so. Id be surprised if they didnt patch it to do just that. So: good catch! (Of course, this was noticed months ago.)
So somebody sues you for (insert nefarious activity of your choice) and you deny it saying you were nowhere near Location-X at the time. Then, under rules of disclosure, they subpeona your iPhone/iPad/MBP/TC to obtain your data. The data shows you were at least in the vicinity of Location-X and so had the opportunity to perform (aforesaid nefarious activity). They win their case and you are required to pay $250K in damages, not to mention the $50K you already spent in legal fees. Did you do it? Maybe not... but it doesn't matter, they won and you lost.
I agree that the location data should be dumped... every few hours... so the files contain minimal information. Backups should exclude all this location data. I cannot imagine why any application needs to know my location from more than a few hours ago.
BTW> Is this location data collected on "Wi-Fi Only" iPads? I understand that such iPads do have/use location services, only its not as accurate.