Not quite, but not far off. You still need to choose a camera that meets your needs all round. You may have to make a sacrifice somewhere, in your choice, but make sure it is the right sacrifice. The important thing to appreciate is that more megapixels do not automatically imply superior image quality, or even inferior image quality. Perhaps when matched with a very good lens, and used at low ISO, extra megapixels really can provide a benefit in fine detail, especially if your zoom is too limited and you need to crop. The real problem with lots of megapixels is that, generally speaking, the performance plummets when the light gets low and you need to bump the ISO. But different manufacturers have more or less success in sensor design and image processing to squeeze the best performance from that sensor. i.e. don't assume that all 12MP cameras, as an example, have the same IQ.
Taking the Canon G10 and Panasonic LX3 as examples at the front of the pack, according to the detailed reviews at DPReview, the Canon will outresolve the LX3 at low ISOs and will yield the superior image. But as the ISO increases the noise from the tiny pixels on the Canon require software noise reduction, which while hiding visible noise (to a degree) also hides fine detail, rendering those extra megapixels pretty much useless at higher ISO. Of course, the Panasonic is not immune from noise and the need to disguise it either, but the effects are less obnoxious at higher ISO levels.
Also with these cameras there is a significant difference in the zoom range : 28mm-140mm for the Canon vs 24mm-60mm for the Panasonic. If most of your shooting is geared towards indoor stuff you may very well favour the Panasonic, or its fast (f/2.0) lens, wider wide angle for squeezing people into a group shot, and better noise performance at higher ISOs. If you shoot mostly outdoors and want to try to capture some wildlife or sports action (don't laugh) then the longer zoom of the Canon may suit you better. 28mm is by no means a bad starting point for a compact. If you want to shoot portraits, especially headshots, or relative close-ups, you may find the 60mm maximum from the Panasonic to be less flattering than, say 100mm from the Canon.
There is also handling to consider - which feels right in the hand for you? Which control system do you prefer? I haven't held either camera but I would guess the Canon would win for me with its very direct physical controls, avoiding the need to hunt through menus to get to what I seek when adjusting aperture/shutter speed/ISO.
Other factors are things like battery life, accessories (e.g. underwater housing), and whatever else is important to you - maybe macro performance or presence/absence of an optical viewfinder.
You have to choose what is right for you. Megapixels is part of that choice but it is not the be all and end all. The megapixels themselves is not the problem anyway. The "problem" is in whether and how those extra megapixels harm your ultimate IQ. Weigh all the pros and cons for your needs.
If you have a DSLR then maybe you accept that when the light gets low you will have to lug the lump around, so on that basis you could choose a compact camera with the lens and features you want most of all rather than concerning yourself about ultimate IQ between 800-1600 ISO, leaving that territory strictly for the big gun.
One last point on noise : the digital age has given people the ability to pixel peep everything to death at 100% magnification and to moan like it matters about per-pixel sharpness or per-pixel noise. People need to get over that obsession. Cameras are for taking photographs of subjects and scenes, not capturing perfect pixels. What may look a bit nasty at 100% on screen may well look beautiful at more converntional viewing sizes when printed or resized for online viewing. There is also very good third party noise reduction software, like Noise Ninja, Neat Image, Noiseware and, I'm sure, others. These can do a remarkably good job of disguising noise before the final print.
Here's a pretty crazy example, shot at
12,800 ISO with my Canon 50D.
Full image resized to 800x533, no noise reduction at all :
Full image resized to 800x533 and processed through Neat Image at default settings (probably a bit too strong). The noise has pretty much gone but so has the fine detail in the fur. But let's not forget that this started out as a 12,800 ISO image. Fur is a pretty evil subject for NR to work on, whether in camera or out. The detail is just so fine to begin with that the software has no choice but to bury it somewhat. A subject like a street scene, a person, or a car would have suffered far less. In fact the smoothing effect of NR can even be a positive feature when it comes to easing off the wrinkles on skin
The NR would have been far less aggressive on an 800 ISO or 1600 ISO example :
100% crop without noise reduction (This image file contains the EXIF data, showing the 12,800 ISO setting. The other images have the EXIF missing because it has either been stripped by the hosting site or by Neat Image) :
100% crop after passing through Neat Image. I did back off the strength of the NR a little :
Take a look at the sample shots on DPReview. There aren't many high ISO examples but from the few I've seen I did not spot an obvious winner at 1600 ISO.
LX3 :
http://www.dpreview.com/reviews/panasonicdmclx3/page18.asp
G10 :
http://www.dpreview.com/reviews/canong10/page25.asp
If you spend most of your time in the 100-200 ISO or even 100-400 ISO range I don't think most people would have a problem with either of these cameras.
.......maybe
