Quality-wise, there's no meaningful difference between 10 and 12MP, only the opportunity to create more unwanted noise as the pixel count goes up and photosite dimensions go down. It's very possible the Pentax will perform better for that reason. I'd also argue that smaller image files fit more frames per card and take up less PC space.

For about $400 you can have a Canon G10 or Panasonic LX3, which are the current quality champs in compact cameras. There are a lot of head-to-head comparisons at places like DP Review for leisurely review. For a bit more, there's the great little Ricoh GX200, which is the most clever option by far (they offer a detachable EVF that, frankly, everybody else should copy). For even more money the Ricoh GRDII and the Sigma DP1, which have image quality approaching that of a dslr, but also cost about as much too.

I recently got the LX3 and am really enjoying it as an everyday carry camera (instead of pounds of slr stuff). The only flaw is the lack of any kind of viewfinder--composing on the LCD in the bright sunlight is a real challenge sometimes. The lens is brilliant and the camera itself is quite small and light.

Neither the Panny or Canon is water or dustproof, so they require a bit more care than the bombproof models, but the payoff is in the pics.

Lots of choices!

Cheers,