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As far as I know the iPhone can multitask, so if google put out an app you could still track your friends and listen to your favorite tunes, so what is the point you are making precisely?
And NO the iPhone can not multitask. Opening a streaming media link doesn't actually rely on the web browser to play the media, so "Goodman Holiday's" example isn't quit the same. How about running Google maps, while listening to streaming music, with the web browser running in the background?
Google Latitude won't update automatically (unless someone makes it keep refreshing every few secs)
As to whether Google Lattitude will be able to continuously update automatically from Safari, I have no idea.