Picasa Web Albums has now caught up with Flickr and started to properly support GeoTagging of Photos.
I have however found a bug in the iPhoto uploader plugin. Basically if you have used a GPS track to Geo tag your photos, if you compress the photos on upload, then you will lose those Geo Tags.
As a point of note, you need to enable the GPS tag reading as described in the Google Help.
I have posted to the Google Web Albums Google Group to see if any one there has come across the problem too.