I'm having the same quandary. It all depends upon whether you prefer the XGA 1028x864 (at 15fps) option of the G7 or the optical zoom of the S3IS. Unfortunately, no camera in Canon's line has both right now, that I know of.
Additionally, I think that the G7 will produce better prints -- at least at larger sizes, which is important to me. And it's small enough to always have on me.
Unfortunately, no camera that I can find now seems to have the easy, one-handed access to video that my trusty Canon S230 has, with the video mode set on the same slider as photo and review. It makes it really easy to shoot video at any time.
With the S3, there's a dedicated record button, but it's impossible (for my small hands at least) to reach while holding the camera with one hand. This may be much easier, however, for those with larger hands. It's worth trying.
With the G7, as with almost every current camera, the movie mode is on the dial along with P, Auto, Av, Sv and M. I think I might be able to sort of kinesthetically memorize the number of clicks over to movie mode from custom, but it certainly won't be as quick and easy as with my 230.
What I would really like is a 230 with a bit more manual control, higher res, and no time limit on VGA movies! Oh well... I'm leaning towards the G7.
Betsey