I don't have this phone, but my experience is similar. It was stock Froyo when it arrived, and I briefly accepted an OTA update to Gingerbread. This turned out to be defective and presumably everyone with my make and model had to roll back to Froyo, as I did. AFAIK, through all this Navigation the navigation tool worked fine.
Then I flashed to a Gingerbread based custom ROM, and that's when navigation stopped working. I thought it was an issue the custom ROM, but then I discovered that people running GB on all sorts of different makes and models were experiencing the same issue.
So...back I went and downgraded to Froyo. And now...navigation still doesn't work.
Either Google has a huge problem here, or else they have decided that they only care if this, one of the most popular Android tools ever, only works on the latest and costliest mobile devices.