Newbie and quadrotor target following

Hello everyone, I am basically trying to make a quadrator follow and hover over a target. The hard part is realising how to actually do the tracking part. I thought about image processing but the arduino is definitely not powerful enough for it. Maybe with an IR beacon of some sorts? GPS maybe?

Sparkfun used to and may still sell a camera that tracked a given color and would give values back over serial about it's relative position. That could work.

GPS will give you +/- 2 meter accuracy, but if this is sufficient it could work.

I personally like IR. Mount an IR LED on the target and give the quad the sensor from the front of a Wii remote (you ought to be able to find those somewhere). If I remember right it returns an x,y coordinate for the top 5 brightest points. You can then use that position to aid in tracking.

I like the Wiimote suggestion and I will actually try to get my hands on one and check how it goes. Any other ideas in case I won't? Low budget for a while.