Buying a compact size, which one EPM2 or XZ-2?

Have you considered the E-PL5 too?

I bought the XZ-1 this summer and thought it was great until I got an OM-D and experienced the capabilities and IQ from that camera. I'm now looking to get an E-PL5 as my next "take anywhere" camera for times when I don't want to bring my OM-D kit along. Yes it's slightly bigger than the XZ-1/XZ-2 but not by much with the 14-42 kit but you'll get much better IQ, easier manual control, and advanced feature set for about the same $. With an M43 system camera you'll also be able to build on and could add some of the great lenses down the road-ie Panasonic 20, Oly 45 etc.

I tried both the EPM2 and E-PL5 in the store, and preferred the tilting screen and function dial, but the E-PM2 is even closer in size to XZ-1/XZ-2. My 2c.