I have extensively used the Canon G-series and Lumix LX series and in my opinion, the LX3 is the better camera for a few reasons.
I like to shoot wide...it is 24mm. I have a Voigtlander 21mm viewfinder I stick in the shoe, and the brightlines correspond to the frame. It is fast...2.0. The ergonomics are better. While the G10 looks great and would seem to be easier to operate with the added dials on top, the joystick on the LX3 is actually faster and easier to use. Less fumbling around. THe lens is a bit on the short size,yes...but haven't you G10 users notice how useless your tele shots are when handheld (lousy focus).
I also love that the LX3 has multiple exposure...a useful (for me) addition to do some experimental photography. I DO wish it had the G10's built in ND filters. Other than that, LX3 hands down.
I also have the Olympus e-420 w/25mm pancake lens. THis is my favorite 'beater' camera, as it gives me nice file sizes and is not much bigger than a G10. If you are thinking about the G1, this is a cheaper alternative and is at the same size. Since the G1 actually makes sound during shutter actuation, I see no advantage to it over the e-420.
When I don`t want to carry around the 5d and L lenses ( for reasons of weight,psossible theft,having to be 'careful' etc.), I strap on my e-420 and have my LX3 in my pocket.