You guys mention the "sensor" and that size does matter here. As I am looking over a cameras specs, how is the sensor represented?
Time to drag out my old sensor size chart.

The sensor is the digital version of film - one of the big difference between digital and film is that with film cameras, most used standard 35mm film, and you could use the same film in the cheapest PnS as the highest-line SLR. With digital, you're stuck with whatever is inside the cameras, and they come in all different sizes. Generally speaking, the larger the sensor, the better it is at capturing light, so it will work better in low light, have more sharpness and dynamic range, etc. Larger sensors require larger lenses. Your average DSLR sensor (the APS-S size in the chart below) has about 15x as much surface area as the usual PnS sensor (1/2.5") which is why DSLRs are that much larger - and why PnSs can be so much smaller. The white bars on the smaller ones are because of the different aspect ratios - the larger sensors are 3:2 and the smaller ones are 4:3.
My take on the Micro 4/3s cameras that are mentioned here is that they are nifty looking but cost as much as DSLRs without all the advanced features. It's definitely something to look into though because they are a bit smaller (when paired with small lenses) and the Olympus EP-1 has been getting stellar reviews.
I agree - the price and extremely limited selection of AF lenses relegates them to interesting toys at this point. I am anxious to see what Samsung's upcoming mirrorless camera will look like, presumably with the K-7's APS-sized sensor. There is certainly room in this field for more players. Actually, I think a wise move would be to sell such a camera with a single fixed zoom lens and position it as a
true "bridge" camera between a PnS and a DSLR.
As a matter of fact, it's a boon for Olympus dSLR users like me as all we'll need is an adaptor to use any of our designed for digital 4/3 lenses with the micro 4/3 cameras and we will still be able to auto focus and everything.
I'm not sure if it will be a boon in the long run for Olympus DSLR owners - I'm just guessing here, but if they get some success, I could see Olympus dropping their DSLRs and moving strictly to the "EVIL" designs. Who knows though, time will tell!