The main issue to me between a dSLR and a P&S is not the IQ but the auto focus lag. This can be dealt with to a large degree with a Canon S or G but of course us film guys are used to instant shutter. In the next few years, this will be a thing of the past also, new auto focus systems are on the horizon for even P&S cameras that will be as fast as current dSLR cameras.
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Canon S and G series have HORRENDOUS shutter lag. I have both. Additionally, the S95's internal flash takes several seconds minimum to recycle... For this reason, followup shots of active subjects are difficult with the S95. The G12 is better with this since it has a larger battery. The F8 min aperture IS a limitation to me on the S/G. I did NOT have any issues with the missing rear dial on the S95. All that functionality can be moved to the rotating ring around the lens which IS functional with either housing. IMHO, this is a personal thing... all the functionality IS there, just some people MUST have it in a rear dial.
My PL-2 approaches my 7d in terms of shutter lag... IOW, hardly any. Heads and shoulders above the PL1 and MILES ahead of Canon S/G series. The internal strobe on the PL-2 recycles in about a second.... faster than my S&S YS-110a externals.
I agree that if buying Oly now, I would seriously look at the PL3 over the 2 -- that said, there is a $400 difference in camera/housing.... From what I've read, I'm hard-pressed to see $400 worth of improvements. If that difference shrinks when it all hits the street, then maybe. If both cameras were the SAME price or close to it, I would absolutely go with the 3.
As for sensor size.... depends on what you are going to do. On a 24x36 inch print from a S95 or G12 versus PLx you WILL be able to tell the difference a mile away. With the PLx, everything is enlarged 5 times LESS than on a P&S to produce the same size (any size) print. On a web site, Facebook, small (8x10 or less) prints, whatever, you will NOT be able tell a difference.
The S95/G12, and Oly PLx all offers full manual control just like SLRs and your MMII.
As for getting "better" pictures from P&S digital VS 35mm.... I would have to sort-of disagree with that one. I say "sort-of" because at the purely technical level... in a 35mm Ektachrome 100 slide you have the equivalent of about 25 megapixels in a 24x36mm image with near-infinite tone and color gradations. That is TONS more information that you get from any present-day P&S sensor.... There is NO comparison between 35mm film and P&S digital. The Canon 5D2 (full frame 21 megapixel) or Nikon D3 series (12-24mp) comes closest to 35mm film.
THAT SAID, in 35mm, you only have 36 exposures and NO immediate view...... SO...... with digital you can see and correct immediately (dozens of times, if needed) and THIS DOES translate into better pictures for most people. On an average 90 minute shallow dive, I shoot a couple of hundred images -- impossible with film -- the chances of getting something really good by employing techniques such as bracketing, varying focal points, compositions, etc, are much greater than when I only had 36 frames.
VAmtnguy: Given your stated purpose (reminiscing with friends, etc), you will be well-served with the original recommendation I made and be nicely under your budget. Just know the limitations of what you are getting if you ever get the bug to expand your activities from that.