But the XM & GPS issues I'm having could just be a result of the antenna's being too close together or could this g-sensor be causing some of this? As I understand it, the G-sensor just picks-up the slope the car is on
As VBlue said, they should be separated by at least 6". That could solve some or all of your problems. If you bought this unit from this "reputable" shop, then take it back - it's their problem.
If you bought it on ebay - or grey-market, I guess its your problem, but I would first go back to the installer. First try moving the antenna apart. Should just be magnetically attached to the dash. If it is glued or something else, you paid way too much for the installation. I would guess there is enough slack in the wire to move them apart without much trouble. See if that fixes or improves your GPS issue.
I don't have XM, but if I understand the other posts, you are not using the Pioneer tuner? That could be a problem.
The G-sensor and gyro are used to approximate your position. They are all inputs to the GPS chip. So your final position will not be as reliable if you have sensor issues. Did they install VSS? If not, you didn't receive a professional installation.
You can see GPS, VSS readings. Press Home/Settings/Navi Settings/Connection Status. Speed Pulse is the VSS signal.
G sensor (incline) and gyro data can be seen on the 3D Calibration Status screen.
BTW, it takes some time for the AVIC NAV system to calibrate itself. You may want to recalibrate it by clearing the statuses for Distance, Speed Pulse, and Learning Status. See P149 in the Z120 manual. If you bough it used, you probably should do this. The sensors calibrate based on the environment in which they are installed.