I had a Pentax Optio 550 until Christmas festivities damaged it beyond repair! Seeking a suitable replacement which allowed me to get more creative I ended up with a shortlist of 2: the Canon G7 and the Panasonic LX2. The G7 won and I have no regrets. Nor am I going to add much to the reviews above, particularly that by 'Planet-G'. It is a superb bit of kit, and after three weeks of constant use, I am still discovering new features!
Anyway, the reason for writing this is to emphasise a few points and make one recommendation:
a. A spare battery is essential - once the low power warning comes on I get about 30 non-flash shots before it is completely dead. And it is probably best to stick with genuine Canon batteries.
b. By comparison with its Mk II predecessor, the SanDisk 1 GB EXTREME III card significantly improves the SD card read/write speed.
c. The User Guide comes as a .pdf file - print it out (2 pages per A4) and spend some time reading it with the camera in your hands - essential!
d. Finally, I spent some time looking for a suitable case (and wasted some money too!). Eventually I found one which is an exact fit with a front compartment just big enough to house a spare battery and memory card. Nicely lined with a soft material and a non-slip base, it is the Samsonite Trekking Premium DF10 Camera Case (available from Amazon for £9.15) - great case and good value.
I hope this is of some use and no, I don't work for Amazon!