My Garmin 296 provides facilities far beyond those in the FS internal GPS - roads, towns, obstacles, VRPs, user waypoints, terrain warnings, vertical nav profile, next heading alerts, etc, etc. Driving the 296 from FS helps keep me current on the device without the £110+/hour cost of renting a plane, and the potential danger of being distracted by the GPS at a critical time inside a real cockpit. The extra information means I can identify my position as Shipston-on-Stour, instead of 10 miles South of EGBW -- very important for situational awareness, particularly if you're a RW pilot (which is likely, given the cost of these things!). I even can program the 296 to work like an ILS, but there's no way I'm going to teach myself how it works in a real plane!
In summary, the internal FS GPS is feature poor, and not even close to a simulation of a Garmin 295, despite what it says on the skin.
As regards GPSOut, the FSX version is better than FS9. The functionality might be the same, but it is more stable. In FS9, it would glitch from time to time, and throw out a position report that was somewhere completely different (like maybe in the middle of the ocean), which could unsettle the GPS, and cause it to flag the current leg as completed when it wasn't. In FSX, the output is rock stable. The one feature I'd like to see that isn't present, is the ability to transfer flight plans back and forth. The FSX planner may be able to use user waypoints, but it's useless for trying to route via a town (say) if you have no indication of where that town is. I can accurately and quickly set up the flightplan on the Garmin (or retrieve it from stored memory), it would just be nice to have the ability to transfer it to FS. or vice versa even.
This summary hits the nail right on the head for my experience. I was using FS9 until the glitches started concerning me. I switched to FSX and haven't had a problem. The update rate going into the Garmin 296 is slow and I'm not sure if that is fixable or not (the 296 unit updates once per second) however using the flightsim seems to slow the rate to at least three seconds. One thing is for sure...Pete you have an awesome program!
Thanks,
Marty