There are several problems with using the GPS in this manner, but it's much better than dead reckoning.
You can use it either as described over, to work on the VMG (or put the windward waypoint several miles further upwind/downwind).
When sailing in relatively stable wind, we also use it to test different trims by looking at the speed over ground.
We have also used the tracking data to analyze jibing/tacking angles and speed on the computer after sailing. If you are so lucky that you can get your hands on a polar diagram or some good VPP programs for your boat you can use this in a constructive way to at least know when you can do better.