Since people have begun reporting success at curing this, I thought I'd post a summary:
I've been busy tracking reg settings and these are the ones that appear to be having the most impact:
MaxBufferSize in Multiplexer set to 256
PollInterval in GPSOneDevice set to 250
SleepOnNoData in Drivers set to 1000
CurrentLogFile and OldLogFile in GPS Intermediate Driver set to NULL
I have attached an updated Cab called GPSIDregfix.cab that sets these values.
ROM versions may impact this as well. It appears that the v2.0 or greater Diamond GPS drivers are involved with people who cure position lag
Radio versions may impact this as well. All posters who have cured position lag are running the 126.96.36.199 Blackstone radio. 1 Poster (me) has also achieved this with the 1.02.25.28 Radio. No posters have reported cured position lag using any other radio atm.
Also, it has been noted that different GPS Navigation software is impacted differently. Garmin software has been cited as being notorious for position lag. TomTom v7 can be achieve 0 position lag and is fully usable for navigation. The status of iGO is that settings/radio updates can reduce position lag to mostly 1 or less seconds. 1 poster has reported here and he considers it satisfactory and usable for navigation.
Edit: cab updated. It was pointed out that SleepOnNoData somehow was left at 100 with the original.
Edit2: now CurrentControlSet has a "0" in it lol. Fixed... what I deserve for changing cabs prior to 2nd cup of coffee