Panny TZ 7 vs Oly XZ-1
Can't directly address your question as I've only handled an XZ-1, and not the other. They're truly quite different camera classes, as the XZ-1 has a much larger imager, faster lens, RAW and, importantly for your underwater work, the OLED display.
Oly images will certainly be more "croppable" than the Panny, how much more depends in part on what ISO you're shooting. The faster lens means lower ISOs and better quality--I suspect the Oly lens is sharper as well. Given the XZ-1's fast lens and big chip you'll not be able to replicate the DOFs on the Panny other than by zooming long, which of course gives a very different perspective, compositionally. You can simulate comparisons with a DOF calculator program that allows you to spec the chip dimensions.
Since you're in this forum i'll also recommend considering the LX5, which has a wider angle zoom.
And here also the post, to which nobody has an answer to my questions in the Oly-Forum:
I use since a couple of years now, the Panny as my backup and also with the underwater-housing to my 7d with lots of glass.
Up to now, I was always satisfied, what this little thing could do, if I had not taken the bulky 7d with my.
So, I know about the facts of the xz-(bigger sensor and f 1.8 - 2.5) but waht about real world comparisons?
Has anybody both cameras and can compare them?
On the xz-1 there is just one third of zoom to the panny. What about the crop possibilities with the olympus. Is there a lot of potentiell?
And what about the shallow dof of the olympus. Can't I achieve not the same with the panny by goiing away and zooming in a lo?
P.S.: What about video comparisons (focusing, etc.). I like the one of the tz7, especially underwater. I use the mjpeg/quicktime format, which I like more than avchd
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