While the LX5, with its updated sensor and image processing, has made some strides in noise suppression over the LX3, the in-camera processing and JPEG compression for low-light shots still leaves something to be desired. Note the yellow splotches on the text at sensitivities as low as ISO 80; interestingly, it looks like the system might be optimized for ISO 200, as that delivers the best results. Processing raw files of the same images, however, allowed for relatively clean and usable images up to ISO 800.
Noise, ISO 800
Here you can see the culprit for those yellow splotches: a combination of poor sensitivity, noise suppression and JPEG compression in the blue channel (top).
Raw vs. JPEG
Here you can clearly see the difference between the JPEG and the raw. It's quite disappointing how bad the JPEG quality is in low light, especially once you see what's possible.
LX3 vs. LX5
One of the biggest enhancements over the LX3 is the improved white balance. However, that also makes the artifacts stand out a bit more.
Raw vs. JPEG, good light
Though it uses a different sensor, the LX5 displays some of the same edge artifacts as Panasonic's Micro Four Thirds cameras--see how crunchy the JPEG version looks? (That indicates it's not a sensor issue, but a processing and compression problem.) But the raw version can yield extremely nice results.
There's some asymmetrical distortion at the camera's widest 24mm-equivalent, but not a lot given the focal length. If the camera is performing automatic distortion control then it's built into the raw processing, too; the distortion in the raw and JPEG versions of this shot was identical.
The color accuracy, even in the default Standard color mode, is very good--with the exception of that orange flower in the upper right, which no camera seems to be able to reproduce. The saturation is pushed a tad farther than I like, though. Still the images are quite pleasing.
With the exception of Vibrant, which is bad in all cameras, Panasonic's color presets deliver subtly different results without wholesale hue shifts.
At its best, which means macro distances, the lens delivers nicely sharp photos.
Out-of-focus highlights are relatively harsh and polygonal.