Yep, and you've ironically missed the fact that a gryo can be *replaced* by that combination of accelerometers, gps, and digital compass rather than just being there to calibrate it. Just because the iphone's (or your watches) digital compass sucks doesn't mean they all have to. I'd take a "good" digital compass over a gyro (assuming I already have a decent accelerometer and gps anyway) anyday. Far more useful in day-to-day activities than the incremental improvement in angle-change detection that a gyro brings to the table.

And as someone who has written gps-data processing software, I think your ideas on the inertial guidance system needs some more work You're not going to gain anything from trying to update the INS every second with gps....gps just isn't that accurate (at least civilian systems) while moving. You'd be better off just relying on the INS with that rate of update. The rate at which it becomes beneficial to update with gps is related to the INS drift rate..which would need to be calculated against a known course with well-defined waypoints. So, while you're on the right track..there's more to it that you've given credit for.