Originally Posted by trapdoor

Go into the Service menu and select the option for Check Sensors.

Whilst driving, check that the WHEEL SENSOR increments/decrements whilst moving - this is a vital sensor that works in conjunction with the GPS and accelerometer to keep the on-screen indicator synchronised with your absolute position.

GPS is accurate, but whilst moving not THAT accurate - therefore the Mk4 uses several external sensors on the car to vastly improve accuracy.

How do I know? My Mk4 system had one of the wrongly wired harness looms which meant that the wheel sensor signal was not on the correct pin into the Mk4 - after much ranting at the dealer, and providing some info from the net, they contacted BMW UK who diagnosed the issue - one pin was misplaced on one of the two multi-plugs (I forget which pin on which plug).

Once it was corrected, the accuracy of my nav was and still is spot on.

Hope this info helps - if you are under warranty then go back to the dealer. If not, PM me and I will try and find the info to help you determine if this is the fault or whether it is a wheel-sensor failure.