Two years ago, I responded to an online LiveJournal survey conducted by Intel Research that seemed to be exploring exactly this application arena -- under what conditions would you want to be notified of the geographical proximity of someone on your LJ friends list? Would they have to be someone you knew already? How many degrees of separation would be acceptable before you weren't interested or wouldn't want to divulge your own location? (Not being terrifically face-to-face extroverted, my threshold was quite low for this.)
For some reason, Dodgeball seems very "New York" to me; I wonder how successful it is.