It DOES work on N95 8GB internal GPS. I am using it!
I am guessing you have missed something;
Once you start the Garmin app, click on Settings, then click on System.
The first option under System is for the GPS. Click on this. It should come up with a screen that has two options;
1. Use Bluetooth GPS or
2. Use Attached/Built-in GPS.
Highlight the second and click Enable and then click Done
If the previous steps have been done you should now have your GPS set to use the internal one.