I'm having this exact same problem and its driving me crazy! It fixed itself temporarily the other day, but now its back to the same old crap. I can't seem to figure how to modify the current location. When I touch the area that marks my current position, it brings up that menu with the street name and then click modify location, then ok, but there's no option to re-orient the direction arrow.
I'm thinking that maybe I'm in the wrong part of the menu? Is there a menu buried somewhere that allows the change of the current position?
Can someone clarify?? Thanks!