The default lens included with the EPL-1 is one of the sharpest kit lens i have come across. And it comes bundled with the cam.
If you were to buy the fixed lens cam like a G12 or S90, you'd stay with the lens and so is the case with the EPL-1, you get a default lens.
But, with the EPL-1 you have an option of upgrading to zoom lens, which you don't with the Canon S90 or the G12. And, besides the lens part, the image quality of the EPL-1 is in a different league altogether. I am currently getting a shootout done in my lab between the G12 and the EPL-1, and results speak for themselves.
Currently for anyone looking at low-light photography or a long term camera purchase with an intention of getting into photography as a hobby should consider the EPL-1 at its given price point of 25K with 2 yrs warranty.
I had a chance of picking up the Sony Alpha NEX3 at heathrow airport in london for as low as 24K. But i decided against it because you don't get international warranty.
Also, s90 won't give you HD movie recording. The S95 has it.
In case you want to shy away from Olympus as a brand (though most of olympus is actually panasonic), you can consider the Sony HX5, its got good sensor+lens combo, gives you 10x zoom and can match the Canon S95.
Canons S95 is the best option for a ultra-compact camera, at its price point of close to 30K in India. In the USA, at almost 350$, the S95 is a very tempting offering in any case. Sadly, you can't get the cam for 15K in India.
Here are links to comparing image quality of Canon S95 Vs Olympus EPL-1, i frankly feel a little odd to compare these two cams, they aren't supposed to be compared, but just to help you decide. The shots are taken by default cam configs (default lens for oly EPL-1)
1) ISO 400 test
Olympus sample image in full resolution (warning, these are full res images, will take long to load on slow connections)
Vs
Canon S95 sample image in full resolution (warning, these are full res images, will take long to load on slow connections)
2) ISO 800 test
Olympus sample image in full resolution (warning, these are full res images, will take long to load on slow connections)
Vs
Canon S95 sample image in full resolution (warning, these are full res images, will take long to load on slow connections)
3) ISO 1600 test
Olympus sample image in full resolution (warning, these are full res images, will take long to load on slow connections)
Vs
Canon S95 sample image in full resolution (warning, these are full res images, will take long to load on slow connections)
Do note, if you are looking for maximum features and zoom, the S95 or the Olympus EPL-1 are not for you. Get the Panasonic FZ35 for about 17K and you will be happy with the zoom, HD recording and fast performance. The EPL-1 is only for people wanting much higher image quality and true low-light shooting capabilities at the cost of optical zoom.
Hope this helps.
All senior camera experts, please jump in and correct me if needed.