Chilli Monster, IO540
I do some consulting for a GPS manufacturer, for whom my father consults to oversee sales in Europe. He called the CAA only a couple of weeks ago to confirm the current situation, having been confused as you by the lack of mention in the ANO. They confirmed that it is illegal to use GPS as sole navigation, less certainly it seems to be also illegal to use it as the primary form of navigation. I'll go with the CAA on this one, thanks, as the rule seems sensible until some sensible ways of using GPS are defined, considering how some VFR pilots use it. The rules are to be changing over the next few months.
You cannot navigate any way you like; I'm not sure how the rules are written down, but even if not in the ANO try defending ignored recommendations in court if it goes wrong. You quickly learn that not everything that is law is written as firm rules, especially in the UK*. Flying VFR you must fix position visually (I believe it is every 60 nm, but it is rather irrelevant to my job teaching navigation theory, and since I would not let my flying students go anywhere like this far I have not checked), although between these fixes you can navigate however you like. Flying IFR you must navigate by some means other than GPS, although you can use GPS to confirm those means.
*Try murdering the mother-in-law, and then try to persuade the court that it was not illegal as there is no written law in the UK against murder. How far do you think you'd get? Yet there is no such law.
RR
GPS is not EGPWS, although it might feed position to one. It will not warn you if you are about to hit terrain, whatever the database. You would have to find teh obstruction and interpret its height w.r.t. your own altitude. That is time "heads in", when you should either be heads out VFR and see obstructions or above MSA and concentrating on correct navigation, not on a moving map display! There is nothing between VFR and IFR. You cannot be a bit IFR!