I have the G5 and bought my wife a G3 but I haven't used the G1. The G3 upwards uses the 16mp sensor rather than the 12mp on the G1/G2. The G2 and upwards have a touch screen which is useful for selecting the focus point and menu selections. The G5 has automatic switching between the EVF and rear screen. The G3 has to be changed manually. The G5 has a much bigger hand grip and is much more secure to hold. It also has a power zoom switch which I use for exposure compensation. Both cameras are likely to be in incremental step up in terms of image quality compared to the G1 but by how much I can't really say, or if it's enough to justify an upgrade. Both the G3 and G5 tend to blow out the highlights a bit too easily and I find I need to use exposure compensation for some shots. ISO 1600 or ISO 3200 are really the maximum usable settings on these cameras in my view. A G3 body is well under £100 these days and
MPB have a number of G5 bodies at £159. Both have video capabilities as already mentioned. The G6 adds wireless capability and support for off camera flash using such as the Olympus FL36R or FL50R. The G7 adds 4K video capability and again I would expect some incremental improvement in image quality and usable ISO. I also own a GH3, that really is a quantum leap in all respects, but that includes size, weight and cost, but a great camera, especially for video.
The 14-45mm lens is well regarded, sharp and probably the best kit lens Panasonic have produced to date. This is reflected in its price on the secondhand market and it is well worth retaining for another body.