I was disappointed when I first heard the Olympus E-P1 would be sporting a low res 3" screen. I usually consider the highest res screen resolutions to be "nice to haves" on regular DSLR's – more akin to security blankets than geuinely useful, but the LCD is of greater importance on a camera with no viewfinder. Given that this is the primary means of composing, a high quality screeng is of absolute importance so knowing that it would be lower res than many (most) compact cameras, it's easy to imagine this was a bad choice by Olympus.

First use of the camera, you kind of get the same feeling too. Playback of images clearly shows the limitation of the LCD and pictures look much sharper on say the Panasonic LX3. A lot of other reviewers complain about this too.

However, first impressions, while important are not the full story. Of more significance is how the LCD performs in action. In that regard, I can say I was pleasantly surprised. The screen refresh rate (unless in an art filter mode) is extremely good but its how the camera performed in bright light that impressed me most. The viewing angles are excellent and even when in very bright sunlight (either backlit or shooting into the sun), this is one of the better screens I have used. My two weeks with the camera in Seattle and Japan have been extremely sunny days and only on a few exceptional cases have I found composing to be challenging. I 've of course used manual focus mode – but mostly only for macros. I may ammend this entry once I get hold of some MF lenses / adapters to make proper use of this feature.

When shooting in low light the image gets extremely grainy which makes manual focusing very difficult. That's without question one of the areas I'd like to see improved. 

Like everyone I'd still like to see the E-P1 or successor (competitor) with a higher res screen but what's hard to get from the spec sheet how good the screen is in bright sunlight. An EVF (Electronic Viewfinder) is an improvement I would rather see prioritized – mostly as it's much easier to feel "connected" when you put your eye up to the camera instead of holding it at arms length. It's not a huge difference in the tangible benefits, but there's no denying that a camera that looks as cool / retro as this deserves to be held and handled in the same way as its predecessors of decades past.

it'll be interesting if the rumours of a GF1 from Panasonic or rumours of a follow up from Olympus will take this feedback and include an option for an EVF. 

Overall though – I was pleasantly surprised with the screen, glad Olympus chose viewing capability over resolution, but like everyone would still like to see both (rather than a choice) as well as an EVF.