This has changed after the first pancake x14-42mm lens from Panasonic, followed by the 16-50mm from Sony and 20-50mm from Samsung:
However, everybody complains that these tiny lenses are soft, cannot produce sharp images. If they are talking about the JPEG images out of the camera, it is true. But if you take RAW, then these "crappy" kit lenses can give you the popping photos like you see from far more expensive lenses. See, these photos, they are all taken with my kit zoom lenses:
I also always increase clarity and vibrance by 20% (except portraits). If I'm not using a Panasonic lens on a Panasonic body, I also check "Remove Chromatic Aberration", because CA will not be automatically corrected for other combinations.
Now, even at ISO 6400, my G5 can still produce totally usable photos, although some noise is inevitable：
I could move luminance deduction to 75, noise would be even less, but could remove more details. Noise is totally gone when I move further to 100, but it looks too plasticy.
ISO 3200 is perfectly sharp and clean:
But ISO 12800 is hopeless trash, although looks way better than the JPEG at the bottom of this page:
Conclusion: now we can have a very compact camera with a retractable lens, which has nothing to lose to a DSLR. All you need is a good RAW converter like Adobe Lightroom with proper sharpening and noise reduction.
These aforementioned retractable kit lenses are still too short for video, because you cannot crop video like you crop photos. This is why I still stay with Panasonic cameras, because they have a so called ETC mode, Extended Tele Conversion, that can zoom loss-lessly up to 3.6X for video. For example, 42mm (84mm) become 110mm (220mm, 1080p60) or 140mm (280mm, 720p60).
Captured from 1080p60 video with ETC (2.6x zoom) and without:
If you need to take motion objects under low lighting condition (such as a restless child in your house), these kit lenses might be too slow. You might need a fast lens such as the famous Panasonic 20mm f1.7. But now ISO 6400 is very usable, the slow kit lenses may do well enough for you. So give them a try first.
There is another big reason for getting a fast lens - large aperture can make background blurry and thus focus more on the topic. You may use the very powerful adjustment brush to blur background and do many other post processing as described here. I don't like those kinds of post processing, because they are totally fake and it is too much work to process differently each and every photo.
Sony has some E-Mount prime lenses with OIS (SteadyShot) - good for video. If you do need prime lenses and video, Sony A6000 is worth of considering. The only downside is: no ETC (digital zoom) for video. I have not found an OIS prime for Panasonic.
Samsung NX300 is very good, but its 20-50mm lens does not have OIS, not good for video.
So, if you need a small camera that is ideal for both photos and video, Panasonic is still the best choice.
I believe you were impressed with above sharp and clean photos, hard to believe they were from crappy kit lenses. If not yet, compare them with their JPEG versions:
A comparison between the x14-42mm and 14-45mm