It's not clear in the post: Is Path taking location information from photos and geotagging posts that do not include these pictures? Or are they just publishing the picture that you gotagged yourself and asked path to publish?
The former is outrageously slimy and the latter is clearly absolutely reasonable.
As far as I can tell from testing the app, it only posts the location of a photo when you explicitly post it to your Path. With Location Services turned off, I posted a photo that lacked a geotag and it contained no location information. I then posted a photo that had a geotag, and it posted the city the photo was taken in. Also, curiously, if you post a geotagged photo without any description text, it seems to omit the location data.
The former is outrageously slimy and the latter is clearly absolutely reasonable.