some add-ons to the "LARP" idea, was that it could run in a couple different modes, perhaps tied to specific game sessions.
One mode was fast, where like the hitman/gunman/assassin game it was meant to be fast paced. Presumably run like a shooter
Another mode, more appropriate for a convention would be slow paced (you want to minimize running and other dangerous laser-tag behavior in a crowded convention hall/hotel/college campus building, this would run more like an RPG
Another mode would be where it would translate your location or "what's on screen" to some in-game threat or opportunity. Thus, you and your friends could wander around fighting orcs and dragons while walking your dog in a park.
Bear in mind, the GPSr on cellular devices is not that accurate. Full fledged GPSr are only accurate to 30 feet. So you're not going to get precision, just proximity.
Also worthy of note, HTML /HTTP protocols for mobile devices has been extended such that your GPS location can be sent back to the server via the web page. Google Lattitude works this way on iPhone (it is not a true application, as it is on BlackBerry).
I'd expect a simple combat resolution system. d20's mechanics are probably good enough. Some healing and magic system that would work well with hitting single opponents, and having effects have a duration in minutes. I'd be wary of "area of effect" stuff, because the GPS isn't that accurate. I'm assuming people playing together or against would be standing fairly close, talking while they played (presumably like a pokemon duel on gameboy).
Parallel Kingdom already has aspects of this, though you are contrained to their game mechanic and their single game world. Which operates at a higher map scale, allowing you to wander on the game map for several blocks, without having to physicall move.
I'm not interested in making people have to go to physical places just to meet up, so much as turning a physical place that you happen to be at into a game space