But I just spent a few minutes reading some about quadcopters vs even helicopters and from what I have read everyone so far seems in agreement that the quadcopters are less stable and less efficient then a helicopter design. It is the software stabilization that makes flight even possible, but even then they aren't very stable.
I had always wondered about this, as I have seen model helicopters (and full sized) maintain a level hover for significant time periods, but I can't ever recall a nearly still level hover from a quadcopter. From reading it sounds like that is tough to achieve given that they are constantly adjusting power to each of 4 motors to maintain flight and without the ability to change pitch of the blades that is the only option. So while mechanically easier to build they aren't necessarily more stable.
Seriously? Every one of the DJI products can do this out of the box using just GPS/accel/gyro/barometer. Newer ones can do it even better by adding in a camera pointing at the ground that works like an optical mouse. Some really insane stuff can be done if you throw an active positioning system into the mix: http://www.ted.com/talks/raffaello_d_andrea_the_astounding_a...
With a GPS and barometer thrown in, position hold should be pretty close to a still hover unless there is significant wind or unresolved problems with the power train
Elevation can be determined by GPS, but a barometer works better.
I would think a barometer would work far better. GPS is not the best for vertical accuracy.
Keep in mind for either method you also have an accelerometer, so even if GPS (or a crummy baro) provides a messy signal for altitude you can average it over a given timespan and compare that against how quickly you are accelerating upwards or downwards.