My first general recommendation would be to get hold of the book "Making Things Talk". It's an excellent resource for learning about this sort of thing.
The book "Physical Computing" is also a good resource but it uses the Basic Stamp as the microcontroller.
http://books.google.com/books?id=6JRcqhVUszEC
I don't think GPS would work for detecting those sorts of distance changes but it could tell you if they were in the same house or not.
Andrew