The G7 just flirts too close to the DSLR price range and has too many drawbacks for what it is. The 10 megapixels are nothing more than marketing fluff and really only make images that much harder to work and take up that much more space on a storage card.
For most people, the 4x6 and 8x10 prints will come out just fine with the pixel power of the S3IS. Most people don't monkey around with picture cropping potential of higher MP cameras.
If you want control and image quality, go with a true DSLR.
If you want a fun, easy to use, powerful point & shoot, the S3 is a great choice.