I'm going to quote DPReview here:
"When we reviewed the G9 last year, we praised it for the styling, handling and build and for its excellent output at low ISO settings. The G10 builds on this by adding handling and control refinements, improving the LCD resolution, and, most importantly, adding a wider lens starting at 28mm (equiv.)."
I'll even concede the point, although I'm not sure how 1/1.7" gets gets to be 7.6 x 5.7 mm. But this is a theoretical issue for most photography. Think, if what you are saying is a serious issue, professionals wouldn't be switching to DX3's at 8K a crack. More pixels mean sharper pictures. The Canon's software does a decent job of filtering noise. I've used it in low light, it's OK. It's no D90, but it's a third the cost. Basically it works fine, except that it focuses a bit slowly. I'm not normally a low light photographer anyway. If I was I'd still have my Leica M4 with a Noctilux. I sold that camera for more than I paid for it. Amazing machine.
I think you think I don't like the D40. That's not the case. It's simply that the G10 is an excellent camera that offers a lot of versatility without the cost creep of a DSLR when you discover you need another lens. The D40 simply doesn't have the resolving power to stand up to significant manipulation, which is a serious issue for me. It also lacks an internal lens motor and it's plastic. That it happens to work better at iso 1600 is a moot point for most photography.
Marc
According to DPReview, the Canon G10 sensor is 7.6mm x 5.7mm or 43.32 square mm. The Nikon D40 sensor is 23.6mm x 15.8mm or 372.88 square mm. That is a factor of 8.607. The photosites on the D40 sensor are significantly larger than those on the G10 sensor, therefore low light performance of the D40 will be superior.