According to the privacy settings help page, you can do just that:
http://www.google.com/support/mobile/bin/answer.py?answer=136650

Set your location. Manually select a location on the map that will be shared with friends

Doesn't look like you can do that per-contact though.

Yes. It needs periodic 'lifting' to boost it back into the proper orbit. In fact, the new ESA ATV just did that today according to space.com (European Cargo Ship Boosts Space Station's Orbit ):

additionally:

It is in good hands in that regard.

--Glenn