As pixel density increases, image quality decreases. These companies are cramming more pixels into the same size sensor. Bigger pixels = better quality. By the same token, I think the wars could (and maybe should?) go to sensor size eventually. There are already several full-frame (35mm film frame sized) DSLR's out there now. The image quality of any of these cameras (even ones with less pixels) will blow any ultracompact point-and-shoot camera out of the water. Bigger sensors = better quality. Bring on the sensor size wars!

The bargains with analog are all on the equipment end. But over time, the cost of film wasted + cost of development (not the mention time spent developing) overtakes the equipment costs of digital photography. Of course, you do still get much higher quality with analog (especially using medium or large format!) when making large prints.