The G7, without question, is a difinitive step backwards in image quality compared to its predecessor, the G6. Despite all it's quality shortcommings, I still far prefer it over the clunky G6 mostly for usability, operations controls, ergonomics, etc., making it my favorite point-and-shoot camera thus far. It's more fun. The Black and Whites are interesting, as are Sepia, but I miss my RAW most of the time.
Of course, it's absurd to even think of it comparing against 24-105L on a 20D in any manner...
But the G7 is pocketable...