BJL, If I struck a nerve, I certainly did not intend to do so. It was how I read your post.
It seemed to me that from reading posts of yours and others well versed in the technology of optics, that the benefit of DX in normal to long lenses was insignificant as far as sensor/film coverage area. In other words, one couldn't save weight or size building a 200mm lens that covered the dx format only vs. FF. Performance, I don't know from beans. Nikon/Canon optical wizards have to solve that one to the customers satisfaction.
The real benefit, as you also pointed out in your post, was the use of shorter FL lenses to achieve the same end result. As the length (size) and weight grow almost exponentially with FL, this difference could be huge and very beneficial to the DX user.
As for Oly, well they are a force in P&S. I usually recommend the XXXX, don't remember the number offhand, but it has a wider end to the zoom lens and has an optical viewfinder rather that the LCD which I personally find useless. I think it was Tom Hogan who posted a list of DSLR sales a few months ago. It pointed out that other than Nikon and Canon, the others barely exist. I have a warm spot for the OM-1 series of camera. Still use one on my telescope. I thought their small sensor idea was brilliant. Still do, but it tough to compete with the big two with all their legacy (old and new) lenses for the changeover from 35mm.
We need as many companies to succeed as possible. Competition always works to the customers benefit. I don't think Oly has failed, they just have a lot of work to do and their sensor needs to deliver the goods. Nikon was handicapped in the same way for the past few years. They rose back up with their latest release which can become a springboard to the future where sensors are now so good, they might be good enough. The battle shifts to other features like price/performance, lenses, model gaps. I think its a good thing that Nikon did well with the D2x. I suspect the pixel war is over and ended with a draw. Gotta admit, Canon won the majority of battles.
The second phase of the battle should bring, slower tech growth, faster and more varied model introduction, and price pressure. The other will catch up. If their is a loser, I see Minolta being the most challenged to catch up. Hand me down sensors after Nikon gets them. Great lenses, but no pro level bodies, for the stars in their lens lineup. High dollar lenses, it seems to me, end up on a expensive body and visa-versa.
I am guessing that Canon is about to explode on the DX front. Smart guys they are. I'm still pi%%$d at them over FD but oh well.
bob