As a long-time owner of Canon DSLRs and lenses and a user of RAW, I nonetheless reached the conclusion that the G7 is currently the best small carry-everywhere camera (given my own priorities) to replace my beloved but aging S50. Lack of RAW is unfortunate, but that's the fact, and therefore I (and other G7 owners) can use some expert help.
Even using SuperFine, with normal settings there are some presumed JPEG-ed effects that can be seen in middle brightness areas. Even at ISO 200 there is a hint of detail smearing seen in the Lumix series (grass and hair taking on that Lumix look), and there is chroma noise. Blown highlights are also a problem at times. My tentative solution has been to use the Custom Color option, and set both sharpness and contrast to -2 (lowest setting), and saturation to -1. then I usually set exposure compensation anywhere from -1/3 to -2/3 stops.
I am guessing that the DIGIC-III algorithm first does sharpening and tone curve adjustments, and then finally implements JPEG compression. If so, my reasoning is that minimizing these adjustments will lead to a JPEG that retains as much dynamic range and detail as possible.
But, I don't know if my assumptions are correct. For example, is it possible that by reducing sharpening prior to JPEG compression, low-level detail is actually MORE likely to be smeared by the JPEG algorithm than if it had been pre-sharpened? Etc.
If someone out there understands how DIGIC-III works, please advise how to achieve the goal of retention of maximum detail and dynamic range on the G7, so that post-processing of the JPEG in PS will give the greatest flexibility to retain dynamic range, enhance image quality, adjust sharpening and tone curves, etc. In other words, what settings come the closest to delivering the benefits of RAW?
Otherwise without an understanding of how the algorithms work, in sequence, a great deal of laborious testing of all permutations would be the only way to be sure this amazing little camera can be used to its full potential.
Thanks !!