[GPSNavX]

Is it possible to reduce the waypoint arrival distance to less than 0.1nm in a future release?

Yes this could be done. I would argue against using "Auto Next" and possibly even an autopilot in a "tight" channel. As you can tell I am not a fan of auto next. Where there is potentional for a collision with other vessels or land one should be "manually" controling things.

The purpose of the waypoint arrival circle is to alert one that they are near the waypoint and give them a chance to make a decision what to do next.

All of the autopilots I have encountered will not automatically change course. They will require the user to confirm the course change. So while GPSNavX will be sending details about the "next" waypoint (.01 out), the autopilot will not steer to it until confirmation. I would rather that warning happen a little bit of distance from the waypoint instead of 10'.