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I'm concerned about Pandora and Google navigation issues I've seen posted about the froyo update. Is it even really advantageous to update to 2.2 anyway? Any noticeable differences worthy of the update?

Dude were have you been? under a rock?! just because some people have issues doesn't mean all will have them. Anyways. The latest OTA fixed the Pandora issue. I have no idea what you are talking about google nav. Its worked great for me in all builds.
 
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Will the update erase all apps that weren't included stock? Will my contacts still be in my phone book?

Assuming you're running stock, you won't lose anything (always back up just in case) except MAYBE SMS messages you have stored. SMS message database changed in 2.2 so they're not compatible (but I think it will try to convert it).
 
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Well, I've noticed two apps not performing well at all so far on 2.2.

Pandora: Sounds very tinny now...much worse quality with froyo (yes, I have high quality checked under preferences and always have)

Cardiotrainer: GPS cut out for over 2 miles of my jog. My GPS has never cut out before on any trail including the one today which I frequent (or using Google navigation in the past). I'm not sure if it just happened to have a weak GPS signal or the program itself performs shoddy under froyo.

So it sounds like my initial fears regarding the froyo update have come true. :(

Worse GPS strength and crappier quality Pandora! I wish I hadn't updated!
 
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Well, I've noticed two apps not performing well at all so far on 2.2.

Pandora: Sounds very tinny now...much worse quality with froyo (yes, I have high quality checked under preferences and always have)

Cardiotrainer: GPS cut out for over 2 miles of my jog. My GPS has never cut out before on any trail including the one today which I frequent (or using Google navigation in the past). I'm not sure if it just happened to have a weak GPS signal or the program itself performs shoddy under froyo.

So it sounds like my initial fears regarding the froyo update have come true. :(

Worse GPS strength and crappier quality Pandora! I wish I hadn't updated!

Well I have the latest update and do not have one issue with it. Even Pandora is better then before.

Here is what I think might have happened. More then likely your phone is not all the way updated. Usually they will upgrade from build to the next in order. So, you may have the crappy first 2.2 build on there. So before slamming 2.2 to death ( I understand your frustration) lets compare your versions with mine. If you can post your Baseband version Kernal Version and Software Number we can see if you have more updates coming.

Baseband version = 2.15.00.09.01
Kernal Version - 2.6.32.15-ge2fb08e
Software Number = 3.29.651.5

Just in case: from main screen click menu/settings/about phone/software information
 
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Well, I've noticed two apps not performing well at all so far on 2.2.

Pandora: Sounds very tinny now...much worse quality with froyo (yes, I have high quality checked under preferences and always have)

Cardiotrainer: GPS cut out for over 2 miles of my jog. My GPS has never cut out before on any trail including the one today which I frequent (or using Google navigation in the past). I'm not sure if it just happened to have a weak GPS signal or the program itself performs shoddy under froyo.

So it sounds like my initial fears regarding the froyo update have come true. :(

Worse GPS strength and crappier quality Pandora! I wish I hadn't updated!

The Pandora quality issue was fixed with the latest OTA, along with some minor GPS crash fix. Seems like whatever you did, you didn't install the latest version of Froyo. What version does it say you're running?
 
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