Several users have reported an issue in which GPS functionality and location services in general do not work properly after the update to iPhone OS 2.1. In most cases of the problem, location service crosshairs appear, but the tracking blue dot (indicative of GPS) never appears.
As described by Apple Discussions poster hitchsaid:
"Both my brother and I have iphones and we both updated to 2.1 and the GPS on both our phones were working fine prior to 2.1 Now all we get are the crosshairs- the blue dot is nowhere to be seen. I have tried all the recommendations sitting outside for 20min, 3G off, airplane mode on/off, soft reset, location services on....wi-fi on, bluetooth off.... but nothing seems to make it work again....what is really bugging me is that it was working fine before the update."
The fix for this issue, for many users, is to navigate to Settings > General > Reset and choose Reset All Settings.