I have the same issues with my iPhone: Never been Jail Broken or insides fiddled with.
** Details: iPhone 3GS 32GB (8.1 GB Free) / Model: MC13B / Version: 5.1 (9B17*) / Firmware: 05.16.05 / Purchased from new / Data: O2UK with 3G & Edge**
I would say I used the GPS function on a daily basis & ever since I updated to version IOS 5.1 my GPS has broken to a certain extent where it can not be used with Sat Nav Apps (CoPilot / Waze / NavFree)
I have tried various fixes, no sim, 3G on/off, wifi on/off, restore as new, back up restore, I have tried everything I have read on the forums.
In clear skies outside, I can get a fix that is not very accurate (Google Maps). I can aventually get a big ring with the pulsating blue dot, however it is out by 60-100+ feet. The dot usually jumps a few hundred feet & don't track your route correctly. Since realizing its something to do with the update & not the Apps, I downloaded GPS Detail App & GPS Status for monitoring purposes. If I use a Sat Nav App, it may start working in the beginning when I get a GPS fix, but soon loses it & the App freezes or cathes up mins later. I was also using Sports Tracker for Cycling & walking however the GPS logging of this data show erratic movements etc.
I am like others so unhappy about this problem, the who;e reason I got my iPhone was because it was everything in one. No need for a sat nav etc 😟 I just really hope there is either an official press release or update to fix this issue.
In future I don't think I will ever be so quick to update my iPhone again. Please fix, 3GS is perfect I don't need any other iPhone etc!