Is smaller really better? That seems to be the trend lately for many camera manufacturers like Sony and Panasonic. Recently Sony announced the NEX-C3, what they called the 'smallest interchangeable lens camera'. Before it was even availble, Panasonic didn't wait too long to steal that thunder. The new Panasonic GF3 (I just bought the GF2 - wth?) comes in just a tad smaller and takes away Sony's short lived title.
As for smaller Interchangeable Lens cameras go, my bet is the GF3 will be the better performer on the market with it's already huge following in the Micro Four Thirds world. There also seems to be more support and compatibility for adapting any type of lens. Right now, i'm having fun with the GF2, and it's been a blast using those inexpensive C-mount lenses. So if you're current DSLR is weighing you down on vacation, these are the new smaller models that are both available for Pre-order via Amazon.
Panasonic Lumix GF3 Compact ILC