The 3G models have a "better" gps functionality because they actually do have the actual hardware for GPS. However does not really work all that well. You have to literally be outside with no clouds in the sky and holding your phone up on top of the empire state building kind of thing. Ok may be a little stretch but it does have a tiny antenna. But it IS there. Most of the time it will use both the cell towers and the GPS antenna to get your fix. You will get the ring when it has a good guess vs the solid dot when it pretty much knows where you are. With all that's crammed in to the phone there are going to be some problems vs a actual dedicated GPS unit. Should not matter if you are on a 3G, Edge, GRPS or WiFi. The only thing that you need data for is the maps and thats where its going to slow everything. If you are jailbroken I would suggest you get the maps enhancer from Cydia. It will keep the cache of maps you view beyond what Apple set for a cache. Then you don't have to worry about reloading the maps as much.

I have my trusty ole 3.99 tzones unlimited plan and have very few problems and i'm on a 2G iPhone