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.
agreed with you..i tried GF1, taking a photo which focus on an object and make the blackground blur is very easy and tat time i am using 14-45mm lens. compare to my LX3 i really need to move the object as near as possible and move to different angle in order to archieve it..sometime the result also not really satisfied...GF1 for sure win in every aspect..