The last post suggested the Panasonic, but have a look at PC Magazine's latest roundup of camcorders:
For the Panasonic GS120 they state, "It produces well-exposed digital video with accurate colors. Unfortunately, the sharpness of the video leaves much to be desired."
Also, it seems that you're going to be doing alot of moving around with your camcorder, and Sony's image stabalization is definately better. I've tried both models in the store, and Panasonic's image was jerky at first, but "settles down" after a few seconds, while Sony's was always stable. Also, the Panasonic image became "jerky" again as soon as I had it focus on something else. Note that this was when both cameras were zoomed in to the max; completely un-zoomed they seemed the same.
I've been going back and forth between the HC-40 and the GS120 myself, and I think I'm going with the HC-40 (or maybe HC30). Here are my reasons for going with the HC-40:
1. Size - I'm going to primarily video my two small children, so the easier it is for me to transport my camcorder, the better. Kids keep you busy and you don't have time to fiddle with where to put your camcorder.
2. Image stabalization - I'll be on-the-move allot taping my little kids, and a "jerky" video would be really annoying to watch!
3. Color - I've read that overall the Panasonic is better, but the image is not crisp and sharp. I've heard mixed things about Sony's, but in my mind, when I watch the video I'm going to notice a slightly blurry, jerky picture more than someone's sweater not looking exactly the shade of pink that it was. Also, PC Mag's review said the Sony's color was fine.
4. Touch screen - I currently have an analog camcorder (Panasonic) with all kinds of buttons. I've alredy messed up shooting something because I had to look away to find a button somewhere, and I would think that having the "buttons" right on the screen would avoid this problem. Also, I've read in a review that you can customize the buttons on the display (placing you most-used ones first), but I've yet to read that anywhere else.
5. LCD display - read that the Panasonic one is really bad if not looking directly at it, while the Sony is great outdoors. This was actually one of the big reasons for going with the Sony, since I really have extreme difficulty looking through an eyepeice instead of the LCD. Others might not have this problem.
I'm not saying that the Panasonic is junk - far from it! I've just evaluated the two for what I'll need them for, and decided on the Sony. No camcorder is perfect (especially in this price range), so you have to weigh the imperfections along with the strengths in light of what you deem most important and what you can live with.
For me, I'm not a perfectionist for color; I figure I can do slight color-correction with my video editing software (if I will even need to), but I can't image stabilize after the fact.