Yes, the gravitational constant is different at different altitudes. In my ballistics calculator I do correct "gravity" for altitude, but I only do it at the beginning of the calculation because typically we are looking at bullet drops in inches and maybe up to a yard or so for typical shooting.
Currently the calculator uses a stepping algorithm.
The bullet starts with a certain muzzle velocity, ballistic coefficient, sight height and bore axis.
Then I calculate where how long it takes the bullet to travel an inch. That time is time of flight. With that time I can calculate how far it dropped. I also calculate how much the bullet slowed down due to drag. Now the bullet is moving slower and I calculate how long it now takes it to travel an inch. The process repeats over and over, recalculating each step.
If I wanted I could recalculate gravity for each step as well, but it doesn't really matter for such small changes in height above the center of the earth.
Falling objects
http://youtu.be/zMF4CD7i3hg
This one is really fun:
http://youtu.be/D9wQVIEdKh8
Objects in a vacuum
http://youtu.be/AV-qyDnZx0A
And here is the one I remember from College, my favorite:
http://youtu.be/cxvsHNRXLjw