As a quick disclaimer, I haven't done this before. But, for what it's worth, it sounds like a reasonable way to me. I might change the order, though, to 3,2,1,4.

I figure that if you can do it without bothering the user who, for all we know, doesn't know longitude from latitude anyway, you may as well (as long as you always have the option for the user to override any of the others and manually set the location).

Setting from the EXIF data first is sort of an extension of the user being able to override the automated methods, I figure, so go there first.

Then, if that fails, try the web service. Failing that, just ask them. If they don't know either, use the IP address, which could be significantly off. At the very least, I'd use their IP address as a suggested value when you let them enter it manually, though.

You could also just allow the priority of each of the four to be set by the user in their account settings, maybe under "advanced settings" or something.