Is it possible to produce an 8mm lens that is diffraction limited at, say, F2. I mean, a lens that is diffraction limited at F2 should have a resolving power of 500 or more lp/mm!! Is such performance ever going to be possible at an affordable price? What is possible at the present time? Where's the cutting edge? Where are the current limits?
I am very interested in this question too, but I am a little pessimistic about tiny sensors.
1) Total detail, in lp per picture height.
When comparing different image or sensor sizes, it is mostly total detail in the sense of lp per picture height that counts: if f/2 gives diffraction limitation to 500lp/mm in a P&S size sensor of about 6mm height, that is 3000lp per picture height, the same total detail as 125lp/mm in 35mm format, corresponding to diffration limitation at f/8, but the P&S requires one quarter of the pixel spacing. (And as I have mentioned before, the DOF is the same for those two hypothetical lenses at those respective f-stops.)
2) Minimum pixel spacing for exposure latitude and "digital grain".
Digital sensors are already reaching about 50% of theoretical maximum efficiency in detecting light for a given pixel spacing, so only about one more f-stop of improvement in signal to noise ratio ("digital grain") and dynamic range is possible at a given pixel size. So it might be impossible to ever go below about 5 or 6 micron pixels without having exposure latitude less than slide film (and about twice as big to match negative film's greater latitude.)
3) Scaling of lens aberrations with image size.
For the same angular field of view, lenses for smaller image or sensor sizes with proportionately smaller focal lengths and smaller image circles probably can control aberrations down to smaller absolute sizes (lp/mm), but probably only in proportion to overall size reduction, and if everything scales with image size, the limit for a lens of the same angular field of view would be the same at the same aperture ratio; perhaps that is where Norm Koren gets his universal f/4 guideline.
Optimistically, that f/4 might assume traditional spherical lens surface shapes. If improvements like better aspherical lens designs can reduce aberrations to match diffraction at f/2, the same designs could probably be used to get to f/2 for larger format lenses too; but at higher cost as always.
Improving the aberration limited f-stop with the same minimum pixel size pushes the minimum "full quality" image size upwards.
P.S. If we accept f/4 and about 5micron pixel spacing as lower limits then the lower size limit for a format limited only by diffraction, unavoidable lens aberrations and film-like exposure latitude is just a bit smaller than 35mm format, probably in the range from the proposed 4/3" format (13.5mmx18mm) up to the biggest of the current "APS DSLR" formats (16mmx24mm).