I believe than Nikon -- if the rumours are true -- will make the best product out of the small camera / big performance approach. They've decided (apparently) to go for even a smaller sensor than the 4/3s one, but larger than one in a typical P&S camera. That translates instantly into smaller lenses, even zooms, and a bit smaller bodies than m4/3s.
Lets compare this scenario with the m4/3s: if Nikon can reduce the size of the lenses for such a system by some 40%, and camera body by some 25%, and install the EVF inside the camera case (no extra add-ons), they have a winner and a complement to their DSLR range (including APS-C), that doesn't cannibalise it, but perfectly complements it. Both Panny and Oly are facing problems now because m4/3 surely does cannibalise their 4/3 DSLR range. Panny has abandoned it already and Oly suffers the most.
But with a smarter thinking, and with just a few small lenses, Nikon can make it a petite, delightfully pocketable system with a bright future that boosts sales to the whole range of Nikon cameras. If I were Pentax, I'd perhaps do the same and follow Nikon -- not an APS-C EVIL (or whatever you want to call it) like Sony did, and Leica flopped with its insane price, but a smaller sensor, smaller body, smaller lenses system approach. So there will still be room for an APS-C camera in the form of a DSLR, and larger (faster) lenses that are more suited for a larger body anyway.
Last edited by Uluru; 06-24-2010 at 06:32 PM.