I also have a G1 and several Leica lenses, with a CameraQuest adapter, and pretty much agree with Michael's report on the combination. I've found that the G1 is a terrific car and travel camera -- I will not again be taking my Nikon D3 and D300 on extended trips, unless the trip is specifically to do photography. I would also point out that Sean Reid, on his site, finds that at least the wider Leica lenses are not as sharp in the corners as the Panasonic lenses, and the difference, as shown in 100 percent crops, is dramatic. He believes it has to do with the way the lenses direct the light rays on to the sensor. (The Reid site is a pay site.)
Before I moved on to other endeavors, I was a newspaper reporter who occasionally shot photos for publication (because photography was my hobby, and I could.) My feeling is that a G1 IQ would be fine for about 90% of the photography that appears in a newspaper; that is, for almost all non-specialty work, such as sports and night shots. Even for night shots, a G1 would match what we used to do with Tri-X, but does not match the capabilities of a D3. Some people have suggested that sophisticated consumer or prosumer cameras like the D90 or the upcoming D5000 would be preferable to a G1 type, because of the slightly larger sensor and access to the bigger system, but that misses the point of the G1, which is to remain compact while providing excellent quality. Even if you're using a D90, or a D5000, you still have to put a Nikon lens on the camera, and the lenses are as bulky as the bodies.
As a fine-art camera, where IQ counts above all, the G1 can't match the big guns from Nikon, Canon or Sony, and, of course, it doesn't have the system support; but I was walking around yesterday with the camera in one hand and the second lens in my jacket pocket covering a range from wide to quite long, and never noticed the weight. Can't do that with a D3.
JC