All persons born in the United States, except those not subject to the jurisdiction of the U.S. government (such as children of foreign diplomats) are citizens by birth. There is some debate over whether other persons with citizenship can also be considered citizens by birth, or whether they should all be considered citizens by law (thus "naturalized"). Current US statutes define certain individuals born overseas as citizens by birth. One side of the argument interprets the Constitution as meaning that a person either is born in the United States or is a naturalized citizen. Thus, to be a "natural born citizen," a person must be born in the United States; otherwise, they are citizens by law and are naturalized. Current State Department policy reads: "Despite widespread popular belief, U.S. military installations abroad and U.S. diplomatic or consular facilities are not part of the United States within the meaning of the 14th Amendment. A child born on the premises of such a facility is not subject to the jurisdiction of the United States and does not acquire U.S. citizenship by reason of birth." To others, the statute that grants citizenship to American children born overseas exempts them from the term "naturalized" and thus, as with the 1790 law, they are to be considered "natural born citizens" eligible for the Presidency. Examples of persons who become citizens at birth (whether "naturalized" or "natural born") would include: birth to Americans overseas, or birth on U.S. soil, territories, or military bases overseas.
It seems to be a matter of how the Supreme Court would rule on the topic. However, I don't think the fact that McCain was born in Panama versus the continental US would affect his policy making at all. I would be surprised if the courts thought differently.