Tempting as it might be to sit back and let the Iranians dig themselves deeper into a diplomatic hole - especially after today's quite generous offer of negotiations over the waterway - the mood ofthe public seems to be really quite surprisingly hawkish.
I agree with you that this situation hands a massive propaganda victory to American Neocons, and while I don't doubt that they and Bush and Cheney et al would dearly love to be able to march into Iran and topple the mullahs, I think it's also perfectly clear that there is no way they are able to. There is nothing on the scale of the buildup that was needed to defeat Iraq presently going on, and that war was a pushover compared to Iran.
As I understand it, GPS doesn't work in a way that would let the system do what you describe, it's works through triangulation of signals. So it wouldn't be quite simple to supply the wrong coordinates, it would be terrifically difficult.