Thanks for the clarification Doug. Still a bulky body IMO compared to Micro 4/3. But again what do you want? Compactness or DOF. Either way still beats hauling around the SLR body's of the 70's. It should all come together at some point if we all wait long enough.
There are a number of "scaling laws" with regard to sensor size:
(for each factor listed below, changes assuming all other factors do not change)
* Larger sensor: better resolution (constant pixel size)
* Larger sensor: smaller DoF (constant F stop)
* Larger sensor: better low light sensitivity (constant number of pixels)
* Larger sensor: longer (real) focal length required for a constant field of view
* Larger sensor: harder to make large ratio zoom
* Larger sensor: bigger, heavier camera bodies.
* Larger sensor: bigger, heavier lenses
* Larger pixels: better low light performance
* Larger pixels: better dynamic range
* Lens diffraction limits: depends only on F-stop,
* Most lenses are best ~F/8 (diffraction plus aberrations)
SLR bodies have to be big enough to have space to have the mirror flip up. (The mirror reflects the light into the eyepiece and flips out of the way so the light can hit the sensor when taking the picture.) The mirrorless cameras (eg Canon EOS M http://www.usa.canon.com/cusa/consumer/products/cameras/slr_cameras/eos_m_ef_m_22mm_stm_kit
) are smaller but cannot have optical through-the-lens viewfinders.
A number of the small P&Ses use a periscope design--the light is reflected 90 degrees and travels parallel to the face of the camera before hitting the sensor to allow smaller bodies.
Some people with large hands find it hard to hold small camera bodies. And finally, the weight of a large body and lens can help one hold a camera steady.
In summary, there is no such thing as a universally optimum camera size--it depends on what you want to do with it and how much money you want to spend.