
There are some great Bluetooth gps receivers around that work well with mobile phones. GlobalSat, Socket, Emtac to name just three. In my experience, getting these to connect with your phone is very easy.
Software-wise, there are many driving direction applications available - TomTom and Wayfinder are two of the more popular. Not only will these provide A to B driving directions across most of Western Europe, but will often include points-of-interest (so you can find the nearest filling-station or cinema) and are starting to include safety camera databases. PocketGPSWorld.com also has a good safety camera database.
For outdoors walking/hiking use there are a few apps that will basically record your route. However, these are not anywhere near as sophisticated in capability as you'd find in a dedicated GPS unit.
For something a little different, you may want to take a look at ViewRanger (http://www.viewranger.com). This brand new application runs on mobile phones and provides a panoramic display showing the landscape horizon - and labels the hills, lakes, woodland, etc. within that vista. It uses a Bluetooth GPS unit to provide positioning to the phone & application. (Disclosure: I work for the company developing ViewRanger.)
For walking, we've found that putting the Bluetooth GPS unit in your pocket or rucksack is usually fine and it will still get a good satellite fix. Under very dense tree canopy, then the accuracy of the BT GPS can vary but the accuracy and quality has improved a lot, and will continue to do so, in these types of situations.
I don't know how the performance of Bluetooth GPS units compares against dedicated handheld GPS units in these dense canopy cases. Perhaps it's time Garmin added a Bluetooth commmunication capability to some of their GPS handhelds!