In David Pogues' review of the iPhone 3G:
Unfortunately, there’s not much you can do with the G.P.S. According to Apple, the iPhone’s G.P.S. antenna is much too small to emulate the turn-by-turn navigation of a G.P.S. unit for a vehicle, for example.
For iPhone, the ‘New’ Is Relative [NYTimes.com]
Update: Apple's Greg Joswiak puts that "small antenna" weirdness from Pogue to bed. [AppScout.com]