I have the Panasonic Lumix G1, the first m4/3, which I bought as a supplement to my Nikon D3/D300 system. I have also ordered from Stephen Gandy (and just got word it's on the way!) an adapter for Leica lenses, of which I have several. The G1 itself is very nice -- light and relatively compact, with little perceptible shutter lag and a bright electronic viewfinder. In other words, it's very well done for what it is.
The problem I have is the sensor, especially after using my D3. As far as I'm concerned ISO 800 is pretty much the usable limit, and that only when you *gotta* get a shot. Even at 400 you get a little noise, though you can clean it up. This will be very familiar to film people, who worked with 100 or 400 ISO, and sometimes pushed to 800, knowing that the push would bring issues...
When I get the Leica adapter, I'll be mounting f1.2 lenses, and even an f/1, which will give me effectively another couple stops over the lenses that come with the G1; I don't know how that will affect the depth of field issues, since the thing has perhaps too much DOF with the kit lenses. There are also less expensive excellent prime lenses that will work with the Leica adapter (I'm thinking of the Voigtlanders.) With fast compact lenses with focus confirmation, I think the G1 will be an excellent travel camera, which is why I bought it. The IQ does not compare to the D3, especially in higher ISO ranges, but the D3 is huge and heavy, and the G1 is not. For 13x19 prints or so, shot in daylight, it's just fine. (I went to a flea market in Pasadena today, carrying the G1 with the 14-45 mounted, on a shoulder strap, never noticing the weight on my shoulder at all; and I carried and a 45-200 in a jacket pocket, and never really noticed that, either. They were so unnoticeable that I wound up not taking any pictures...)
However, Olympus is about to come out with their version of the m4/3, which will have internal image stabilization. If the dedicated lenses are as good as most Olympus lenses, and if the Leica adapter will work on the Olympus cameras (and I don't see why it shouldn't) then this may be the real answer -- an internally stabilized camera with excellent dedicated autofocus lenses and the ability to use Leica/Voigtlander primes. And perhaps a better sensor than the one in Panasonic. That is my hope; my fear is that Olympus will cripple the camera in some way to block the use of non-Olympus, non-m4/3 lenses.
Some people have suggested that Nikon/Canon may jump into this market with a small camera body, but there'll still be a difference, unless they come out with whole new lens lines -- the G1 with the 14-45 (28-90 equiv) kit zoom weights less than the 24-70 zoom lens (alone) that I use on my D3.
JC