Definitely gets a thumbs down from me. After the furor that fans made over the NEX's UI shortcomings at launch (many of which were addressed in a firmware patch btw), Panasonic went and repeated the same mistakes sony did. Lack of mode dial is annoying, but what is the deal killer for me is the loss of the AE/AF Lock button. On a MFT camera with its poor dynamic range, that is almost a necessity.
Also, the RRP on the 14mm lens is ridiculous. $400 for a 28mm-equivalent? That's twice the price canon, sony and nikon charge for their 28mm primes. Having said that, the 14mm *is* a nice lens, just not worth 4 Franklins IMO.
Right now, the GF1 can be had with 20/1.7 for around $550-650, and is a more usable device (although touchscreen focus point selection is pretty nifty on the GF2). It has the same sensor, and with tester13's firmware hack, is also capable of 1080p video. The only caveat is that I don't know if they've locked down the firmware of more recent production bodies like they have with the GH1.
At this point, though, I have to express my disappointment with the micro four thirds format. They've been stuck on the same sensor for 3 years, have a very small lens lineup made primarily of slow expensive lenses, and are soundly beaten on value by entry level DSLRs and their mirrorless competitors from Sony and Samsung. Their only saving grace is that Sony and Samsung have their own shortcomings - NEX still only has 3 lenses: 2 oversized zooms and a cheap, nasty 24mm equivalent prime. And while Samsung has a couple of great lenses (the 30/2 and likely the upcoming 20/2), its sensor isn't that great.
At least it's luckier than Four Thirds, which finally (inevitably?) saw the sword of Damocles drop. And while MFT got the 14mm prime and upcoming 12mm, 4/3 never even got a single wide angle prime (!).
If you're shopping for a small camera now, my pick is probably the Sony A55 SLT, which is not great for video but has DSLR-level AF and a huge selection of Sony and Zeiss lenses. The Pentax K-r is another possibility, but mainly if you're smitten by Pentax's lens lineup (FA Limited, yum). There are still areas where the GF1 requits itself very well - hacked AVCHD video, the 20mm lens is a beaut, and specialty lenses like voigtlaender's 25/0.95 are still great reasons to get the camera/format, but it really seems like MFT has to survive in spite of Panasonic sometimes.
Wind, Sand and Stars.