It’s been the dream of serious digital photographers for a long time now, a small digital system with interchangeable lenses, near SLR image quality and a pocketable design.

The first real attempt at a “pro P&S” could be the Sigma DP1. Its large SLR sized (1.7x crop) sensor produced amazing images behind the fixed 16.6mm f/4 (28mm equivalent) lens. Sigma continued the DP series with the DP2, taking the same sensor and placing it behind a 24.2mm f/2.8 (41mm equivalent) fixed lens. But neither quite answered the call for a interchangeable lens pro level P&S.

Until now.

Olympus has been talking about micro 4/3rds, their offshoot from the 4/3rds specification. By removing the need for a reflex mirror and optical viewfinder, micro 4/3rds reduces the registration distance (the distance between the lens mount and the film plane) from 40mm to 20mm. Allowing for a much thinner body and smaller lenses. The advantages of this are obvious, it’s now possible to squeeze and interchangeable lens system into a point and shoot sized body.

Which brings us to the Olympus E-P1, the new Digital PEN, in reference to their PEN series of compact half frame SLRs that were made from the late 50s to the mid 80s. If you haven’t heard of the E-P1 you can read about it at Olympus’s E-P1 product page or at DPreview’s Hands on preview.

On the up side, based on the sample imagery I’ve seen the E-P1 is hands down the chose for a low light point and shoot sized camera. ISO 6400, while noisy, looks usable for small prints and web sized images, at least after some noise reduction. ISO 1600 looks quite good right out of the camera. Both of which are far and away much much much better than anything the high end point and shoot market can offer. For comparison the Canon G10 starts getting noisy at ISO 400, and by ISO 1600 it’s pretty close to useless, ISO 3200 is an in-camera binning mode resulting in a low resolution image that’s still noisy. None of that appears to be the case here at all.

Also the micro-4/3rds platform, while compatible with 4/3rds lenses via an adapter is still starting out. Hopefully the micro-4/3rds manufactures, especially Olympus will recognize that the E-P1 users are going to want more than just f/3.5-5.6 zoom lenses, and start offering a verity of f/2.8 and faster lenses, other than the 17mm f/2.8 pancake they current offer. However, there is quite a bit of flexibility with the E-P1, and Olympus has adapters for both 4/3rds and Olympus OM mount lenses. Of course neither is quite as ideal as having small fast micro-4/3rds lenses.

As impressive as the E-P1 appears on first glance I find two major faults that tip the balance away from it for the time being, at least for me.

The first problem I have with the E-P1 is price, at least the asking price for it now. The body alone is listing at $799, the starter kits at $899 and those are the prices at the Olympus PEN Amazon Store^{(Affiliate Link)} not just the recommended street price. The Sigma DP2 is only $650, and it’s older DP1 cousin is now $550. Placing the E-P1 at a $250 premium over the next closest competitor. Of course it’s not quite a fair match, the E-P1 has interchangeable lenses which has to count for something and does, but to me a lens mount doesn’t justify a $900 price tag.

The price tag puts the E-P1 out of the P&S market (even the high end point and shoot market) and well into the entry level SLR market. Is the E-P1’s small size really worth the premium to point and shoot buyers? Simultaneously, how well the limitations impact the choice of entry level SLR buyers. Right now the E-P1 seems to be clearly aimed and priced for pro and serious amateur photographers looking to add a high quality compact camera to their kit.

Stacking on top of that the E-P1 was designed to be small, we can agree that’s good thing in this case. However, it’s so small that apparently Olympus couldn’t figure out how to include a built in flash. Don’t get me wrong things are definitely tight in it’s 4.9 x 2.8 x 1.4 inch body, but it’s only marginally smaller than Canon’s G10 at 4.3 x 3.06 x 1.81 inches. Yet the E-P1 lacks a built in flash. Sure the E-P1 has a hot shoe (so does the G10) and can take any of Olympus’s flashes including the new FL-14, the new purpose designed flash for the E-P1. However the FL-14 is another $200 you need to add to the kit price, as one isn’t included.

This brings us back to the market question. For the pro photographer the lack of a flash isn’t likely a major issue. On camera flash used in any capacity other than balanced fill produces flat ugly images, and so it’s almost never used. But you do have to admit that the lack of a built in flash in those emergency situations where you need it is something of a strike (though not a big one) against the E-P1 and carrying the FL-14 is a bit contrary to a small secondary camera.

On the flip side, the P&S crowd doesn’t generally have the skills, knowledge or desire to use other lighting techniques. The rely on the built in flash when it gets dark, their motive is to get a snapshot of their friends at the party, not a full on portrait. In this case the lack of a built in flash hurts the E-P1 rather significantly, even ignoring the price.

It’s also worth noting, that every entry level SLR in the same price range or lower, has a built in flash.

My last complaint, though this is very minor, is color. The E-P1 isn’t available in black. The E-P1 is silver metal with a choice of 2 colored rubber hand grips (gray and beige). While it’s not a major issue, I prefer my camera equipment to be as subdued as reasonably possible. Some silver trim and accenting would be nice, but I would really like to see a black version of the E-P1 similar to how Leica has a silver and black version of the M8.

If Olympus or the retailers can get the price of the kit down to 2/3rds of what they are asking for now, say $500, they’ll have a real winner on their hands. Not that the E-P1 isn’t already quite a camera. I’m betting this wont happen for a while though. The closest Olympus sibling, the E-620 which shares a similar sensor, is currently selling for $700 (down from it’s $899 MSRP kit price) with the 4/3rds equivalent 14-42mm f/3.5-5.6 lens and it’s been available since early this year.

If the price of the E-P1 and 14-42mm kit zoom, can be brought to a $100-200 premium over the Canon G10 the E-P1 is a hands down clear choice. In fact other than the DP1 and DP2, I can’t think of a single high end point and shoot that touches the E-P1 in terms of image quality and flexibility. At the $900 price point though, the decision quite a bit more difficult. Size is a huge factor, but if size isn’t your overriding concern you can get a similar quality Olympus E-620 kit for almost $200 less.

Also there’s the system issue. The E-P1 needs to be approached more like an SLR than a point and shoot. The accessories and lenses that accompany the system should at least enter the equation. If you’re an Olympus or 4/3rds shooter it’s a non issue, if you shoot one of the other systems it might be. Also as of now, micro-4/3rds lenses are few and far between. The E-P1 debuts with a 14-24 f/3.5-5.6 zoom and a 17mm f/2.8 prime. And while 4/3rds lenses can be used with an MMF-1 adapter they will be quite a bit bigger.

One thing is for sure, the E-P1 is definitely the camera to watch. If the price of the kit falls $300, it’s also definitely the camera to have. Hopefully the E-P1 will be successful enough to push the big 2 camera manufactures into building larger sensor point and shoots or a similar small interchangeable lens platform.