There are presently a number of GPS turn-by-turn applications on the App Store so it seems unlikely Apple would reject this app unless Google were to add some poison pill to force a rejection.
AT&T is probably more of a roadblock here than Apple. I'd bet as a condition for allowing them on their network, they get a cut of the current navigation apps.<p>To Apple, I would think that equaling the playing field with this feature is much more valuable than their $30 for each TomTom app.
This just makes me think about all the wonderful iPhone applications that are being strangled in the cradle because their inventors don't have power and clout to pressure Apple the way Google does. I wonder if Apple realizes that Microsoft is to Mac as Google is to iPhone.