Another possible resolve for the GPS is after creating the service reference, save, close and reopen the solution. Then right click on the new service reference and select update service reference... this has worked in VS 2010 Pro x64 once so far.
@G Cupertino: I get the same location returned and I live in the USA. I believe it is a default location to simulate a working program; when I set the corrdinates to Microsoft in Redmond Washington, the app resolves correctly as mentioned in my postings.
I really enjoy this video series. FInally a video series that actually works (with minor modifications).
I ran into several problems getting the GPS to work; finally, I re-installed the Windows Phone 7.1 SDK into my Visual Studio 2010 Professional x64 and this GPS things works.
I obtained the Windows 7.1 SDK from https://www.microsoft.com/en-us/home/default.aspx which provided a link to the download. If you are having problems, re-install your Windows 7.1 SKD as the RTM version does not work... This process resolved my issues, I hope it works for you too.