I don't think any of us are denying that. It's just impossible to replicate on a miniature scale what bigger cameras can do with better optics, longer focal lengths and larger sensors. If you're planning to blow a pic up and pixel peep, then you're right, even a tiny dedicated point-and-shoot is going to show shortcomings. But to "capture the moment" in average lighting conditions, a cell phone camera can be your friend.
As for my comment on Sony P&S cams, I, too, am not a fan of the in-camera processing, although they have toned it down a bit from where they were about three years ago. The Sony is a marvel because it has a respectable wide angle lens that most cameras of this ilk lack (a necessity for indoor group shots), some great low-light capabilities that produce mostly respectable results, and a wonderful internal lens design that mean not external moving parts (other than a sliding lens cover), which means it's a great camera to keep in a purse full time without a case, or in a back pocket. But this Sony TX9 is hindered by its small sensor and miniature, complex optics, that mean every photo is a bit of compromise vs. carrying around a slightly larger point & shoot with a more traditional extendable lens design.
I just threw it out there to point out that "real cameras," too, are full of compromises -- the Sony is great at being small, but not something I'd go to for framed prints.
