Hi Richard,
That is an interesting case you have here. I�??ve tried to do it also and get the same result you have. Apart from the wrong order, and the missing points, ArcGIS seems to invent its own point locations! When you zoom to the lower left corner of the data, you�??ll see that the a vertex of the created line is between the points with FID 31 and 32. This happens at several locations.
I tried a workaround the sort order by adding X and Y columns and exporting the table to DBF. In Excel I sorted the data on the GPS_second field and saved the file. After adding it to ArcMap, I created XY Events and exported the layer to a featureclass (in a FGDB). Using this point featureclass in the Points to Line tool resulted in the proper order of the points, but still there are points missing and new locations created.
I seems to be related with the coordinate system. If you project the points to a projected coordinate system (like NAD_1983_UTM_Zone_15N) and then use the Points to Line tool, it will honor the sort field and the locations.
In 10.0 the results is correct (locations and sort order). The underlying script has been rewritten in 10.1 beta to implement the new da (data access) module. Apparently, there are some situations where it is not working correctly. Esri should look into this!
Cheers!