Could you be please be more specific about how you "copied the properties file from the default Gps provider?" I'm not sure what this means, or perhaps more importantly, why it worked.
The google android website has information on Location Services and their usage, it also explains how to create mock location providers, which is what this very useful (thnx jeremain!) does for us automatically. Check out the details at http://code.google.com/android/toolbox/apis/lbs.html
It doesn't mention that a properties file is required - so many thanks to wannabe for finding out the problem and saving us a whole lot of trouble.
Copying the properties file solved the problem for me, although I had to restart the emulator for it to take effect.
To browse the android phone's file system, you need to run "adb shell" which starts a unix shell of the phone's file system. copying files from your computer's file system to the phone's file system and vice versa is done using "adb push" and "adb pull" respectively.
I assume you're developing with Eclipse, so you can use the DDMS perspective, which has a graphical file browser for the phone and lets you pull and push files. You can explore the phone's file system conveniently from there.