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It's diffraction limiting...
I'd suggest a lesson in basic lens theory for the reviewer. The reason that f/32 is soft is nothing at all to do with the quality of the lens, but is just a function of the small aperture size. Any lens stopped down to F/32 (if that's an available setting) will exhbit the same effect. It's caused by the diffraction of the small aperture. In fact a 16MP APS-C sensor will gradually suffer increased levels of diffraction softening from around f11 onwards. By f32 it will be severe as the Airy disc covers about 8 pixels.
I still don't get this category. Zoom, super zoom and bridge cameras seem much more appropriate for the intended market.
Re: Buy a cheap DSLR
Sorry John, here's the big red flag back at ya. I don't see where Tony asked for cheap or "not too big". Considering "too big" is very much a personal matter and I might even surmise the smallest cheap DSLR is "too big". A quick look online shows a Rebel T3 priced nearly the same as the NEX-C3 but I'd say it wasn't small enough.
Personally speaking, the Lumix gf3 has both the missus and me wanting to take more pictures because it's something that can easily carry every day as small is my main concern. Oh, this may come as a shock but I only carry a single lens; I have others that I may break out for special occasions like weddings or a vacation to Angkor Wat but mostly it's one lens, the smallest one actually. If one day I am as good as the tool, I'll consider moving up but I expect sensor technology will easily outpace me so I may even get to move to a smaller size camera. I'll finish with the mention that the missus insisted on getting the gf3 (damn my bad luck) after using my g2 because the g2 was "too big" and is capable of taking better pictures than we are.