Actually, I like it as it is.
The OP only mentioned those times that he successfully fired off tracking and found his friend.
To provide a better picture, at lower skill levels, most of the times you will fail to find anyone, regardless of how high or low their quarry's hiding skill is. In fact, you can be standing right next to an unhidden bull and tracking will tell you it can't find it, duh.
But, you can keep using tracking until it finds the bull. Same thing if you want to find hidden players, except that unless you know for sure someone is hiding in the vincinity, you won't bother to keep using tracking.
Also, it doesn't show you all the eligible quarrys. There may be 10 people around, but your 20 tracking only reveals only 1 or 2 of them, if at all.
The higher your tracking is, the more reliable tracking becomes.
After you succeed witht he skill check, it shows you a list of quarrys that you track. Once you select one, there'll be an arrow pointing towards the direction or your selected quarry. This arrow updates if your quarry changes position and lasts around 2 mins as the OP has tested.
To break it, cross a server line or recall or gate out and come back. You can also hide/invis (or re-hide/re-invis if already hidden).
It works just like most skills, spirit speak/alchemy/hiding, there's a skill check to determine if you succeed. At lower skills, you fail alot. But once you succeed, it works with full benefits. You don't get half a potion if you succeed at alchemy at only 50 skills points. Nor do you hide only 1 of your arms if you succeed in hiding at 20 skills points.