The XBee simply transmits, over-the-air, whatever it sees on it's TX pin, and puts whatever it receives, over-the-air, on the TX pin. If you connect the GPS output to the TX/RX pins of the XBee, provide power and ground to both devices (common ground), it will work fine.
They are designed for 3.3V. Perhaps you could use a diode for a small voltage drop from 3.7 to around 3.1. Or, you could check digi.com, to see what the maximum voltage rating actually is.
I was browsing and reading what others experienced with the XBee 900 Pro as I am working with them now. I have base functionality and just wanted to see what others ran into or had success with as they went further. I am replying to this to correct something for the sake of others who might read this...
Thanks, so If I buy 2 Xbee's should they just be able to talk to each other out of the box?
Nope. However, it should be fairly trivial to set them up to talk to each other.
I can only speak from my experience with the xBee Pro 900. The answer is "Yes - right out of the box". If you plug 2 of them in, turn them on and send characters to either one, they will be transmitted to the other one. My first test was to set up a "bucket brigade" of data. I put the xBees in two different Arduinos. One was connected to the PC via USB and the other via Bluetooth. On the one connected by USB, I checked for input on Serial and if it was available I read it and printed it to Serial2, where the xBee is. I also did the converse of that, checking for input from xBee and printing it out through Serial. On the other Arduino, I did pretty much the same thing only using Serial3 (these are MEGAs) where I have a Bluetooth component installed. I brought up two terminal session side by side on the PC, one connected to USB and the other to Bluetooth. Whatever I typed in one session would show in the other, passing through the USB, the 2 xBees and Bluetooth along the way in one direction or the other. Nothing was done to the xBees other than wiring them up to TX, RX, + and -. I have not even downloaded xCTU. I will be doing AT commands and what not to give them addresses and generally complicate life, but for base functionality testing just try to send text over without changing any settings.