Yes it does.
From the moment it was pre-announced, it was advertised as having GPS on board, but initial problems with conflicts between the 3G phone, and the GPS signal in some locations meant early samples were supplied wihout the GPS activating software. HTC and Dopod both released 'non GPS' ROM's at the beginning, as did Orange France.
Around February, Dopod released the first 'GPS Enabled ' ROM update, followed by Orange France. Orange UK then launched their version of the P3600 with a GPS enabled ROM from the outset, but Orange themselves seemed unaware of the fact, and still don't advertise the M700 (Oranges version of the P3600) as having GPS. Some Orange customer service people still say there is no GPS, and that you have to buy a bluetooth receiver, despite the M700 pack inserts including a link to Orange's own online navigation system.
HTC then released their own 'GPS Enabled' ROM in March.
So, it's not surprising that there is still confusion, but a quick look through the posts in this forum should reassure you.