I'm going to answer the first part of my own question.
After upgrading my iPod Touch to iOS 5, Location Services started working again. Not only did it start working, it's showing the location as a point in the street in front of the house.
1) The location I manually submitted to Skyhook in 2009 was in the street farther south, by the mailbox, so the old data point is not being used. Not suprised since I have no reason to believe that Apple went back to Skyhook. A visit to Skyhook's website verified that this point has not changed.
2) The location that Apple started using last year was a point on the main highway 1/2 mile east of here.
So somehow Apple has independently obtained new data about my wifi location. It's possible that during a recent party, somebody with an iPhone had connected to my Wifi and that data was sent back to Apple. It's also possible that a Wifi data collection vehicle drove down this road. It's very rural with only three homes on a one mile stretch, so although possible it's difficult to believe.
It was my previous understanding that Apple started requiring that devices be within range of several Wifi signals to improve Location Services accuracy. Being in a rural location, it's nearly impossible for my iPod to pick up any Wifi signal other than my own. With Skyhook, this was never an issue.
However, iOS 5 seems to heavily depend on Location Services so maybe they've changed something critical to how it functions in order to improve accuracy without requiring multiple Wifi signals.
I'm going to accept my own answer. If anyone has a better answer to my original question, I'll consider accepting that instead.
Fortunately for you, iOS will not update without your consent. You have to physically go in and choose to Download, and Install the Update (two steps) in order for it to update to the next version of iOS.
iOS 5 or higher have a feature called OTA (Over the Air) updates, which bring the convenience of not having to plug your iPhone into iTunes to update it - which you are aware of. It displays a badge on the Settings app on iPhone homescreen, but this will still not update without your consent (unlike some Windows OS updates).
Unfortunately, the Settings.app is not in the list of notifications that you have control. So you will have to get used to seeing the "1" on the Settings.app.
You will also have to be careful to decline (skip) updating your device anytime you plug it in via USB to iTunes. One thing to note, is that you don't have to worry about Wifi syncing with your device. It will not update your device using iTunes Wifi sync.
Best Answer
The TV app is not new, Apple just renamed the Videos app.
You probably had the Videos app in the same location and when it was updated it just appeared to be placed alphabetically. In reality, since 'T' is close 'V' you might have just thought it automatically sorted itself.