The LX3 can actually have good image quality even at higher ISOs provided exposure is optimum. If you have an external flash, it'll definitely help out a lot. I've done an ISO comparison with Metz 36 flash and can get acceptable image quality all the way to ISO800.

Regarding apertures, I've always confused myself with the F2-2.8 of LX3. Whether is it effective F2-2.8 for LX3's sensor size (equivalent when compared to 35mm format) or it is actually closer to F3.5, 4 or even higher when compared to 35mm format. Because the LX3's smaller sensor size would be harder to 'make' bokehs than a large sensor size.

However as a general guideline, a larger sensor is the way to go. A larger surface can capture more light than a smaller one. I'm sure everyone knows by now. You'll definitely be able to derive higher shutter speeds. On my LX3, even at F2 @ ISO400, I can only get as much as 1/30sec shutter speed while a proper DSLR with a F2 lens can get upwards of 1/50sec. See the difference? Of course, ignore other conditions for the sake of discussion. Also the resultant shutter depends on a lot of factors like optics, effective aperture, etc.

When it comes to image quality, a lot comes into play. As long as a lens is properly and optimally matched to a sensor, it doesn't really matter what size it should be. We should also talk about resolving power of a lens to a sensor. Obviously with the exception to SNR due to reasons we have previously mentioned above. However, we're talking about LX3 vs the GF1. I think its a no brainer. GF1 for sure.