I was having to make this decision earlier too. My needs are simple. I am coming from a PnS. I've never been happy with my photos, especially low-light shots. I upgraded first to a Fuji F200EXR, but I was still not satisfied with the low-light shots with this camera although it was a step up from my previous PnS. I then sold that off and got a Pentax K-x, and bought a 50mm f/1.4 lens to go with it which took amazing low-light shots... however I found carrying around a dSLR without really needing to use all the functions of a dSLR a bit too much, when all I needed was a simple camera that could take good low-light. So I sold the K-x. Now I'm trying to make a decision between the LX3 and GF1. I do own a HD video camera that records in AVCHD, and I would like to have this built into a camera too.
What I've found at the end of the day is that I need these features in a camera:
Big aperature (f/2.0 at least)
Wide angle lens (24mm or better)
Portability (dSLRs are out)
AVCHD video
While the GF1 with the pancake lens fits the bill, I still think I would get annoyed with the bulk after some time. Furthermore, the pancake lens still can't give me as good a wide-angle as the LX3. On the other hand, the bulk of the LX3 is as much as I can take personally. The GF1 does however give me AVCHD lite video capabilities. Now I don't quite fancy the 14-45mm lens that comes with the GF1 and should I seriously consider the GF1, I would have to factor in the fact that the only telezoom lens that I would consider would be the 14-140mm HD lens but these cost as much as the GF1 with pancake lens.
At the moment, the only thing stopping me from getting the LX3 is that it lacks AVCHD. I may get a 2nd hand one in the interim just to mess around with it, but I'm ultimately looking at it's successor which I hope will come with a little more zoom and AVCHD video.