I've just purchased a Panasonic GF1 + 20mm f1/.7 pancake lens as a second "backup" body/lens combo..........and I absolutely love it. The image quality produced from this lens and camera is insanely good for a camera of this size, and especially good for taking out on trips where an SLR would not be ideal. I tend to keep both cameras in my bag though, and use both because it is that good. Very sharp and colours are gorgeous.
It also has HD video, which I have not thoroughly tested but first impressions seem quite good, only downfall is that the microphone is mono and not stereo but clear enough for standard use. If you don't want to record in HD, you can always turn down the quality so it is not HD and takes up less space.
This does come at a high price however, at £600 for the camera+lens, although when you compare to an SLR+high end lens, it is still relatively cheap. It does also allow interchangable lenses so is more future proof and customisable/expandable as a camera which most other non-SLR's don't offer, so you do get what you pay for.