You’d think that this would already be available off-the-shelf…

I can think of three or four realistic first-person shooters that might already fill this niche. There are probably more…

Reportedly, the army has had a great need for virtual training aids and initially wanted to get videogame training materials out to units before the money was available. Though the army has a large interest in watching the gaming industry for useful technology that could be adapted for military training applications, it doesn’t plan to be go toe-to-toe with game publishers.
The Escapist : News : U.S. Army To Invest $50 Million In Gaming

It seems like DARPA needs to connect up with MSR:

Mobile Augmented Reality Games and Visualization
Steve Feiner and Sean White of Columbia University demonstrate prototype mobile augmented reality applications. The goal is to merge virtual information with the real world, leveraging our skill in interacting with physical objects to interact with virtual ones. Demos include hand-held games, user interfaces for an electronic field guide for plants, and visualizations of site data for urban designers. Work being displayed is implemented using the Goblin XNA 3D platform, running on top of Microsoft XNA. Demofest 2008

I saw a demo of Goblin a year or so ago, and it was pretty cool!

For some reason, this all reminds me of the silly reports when I was a kid about how many hours of “combat training” that we all received from watching G.I. Joe cartoons. Heh.