The highest I'd use in good light for JPEGs is ISO 800; even at low ISO sensitivities the shadow areas show a little too much noise reduction, but the brighter areas look fine.
(These may look slightly underexposed, but that's a result of the default color settings, which increase contrast and saturation too much.)
2 of 11 Lori Grunin/CNET
JPEG, high ISO sensitivities
While it can squeak by for ISO 3200, past that it's pretty unusable.
3 of 11 Lori Grunin/CNET
ISO 100 JPEG
Pentax's processing seems to result in slightly soft photos -- the raw version of this looks a little sharper.
(1/80 sec, f4.5, ISO 100, AWB, spot metering, 18-55mm lens at 42.5mm)
4 of 11 Lori Grunin/CNET
ISO 200 JPEG
Generally, the photos are acceptably sharp, if not great.
(1/80 sec, f9, ISO 200, AWB, spot metering, 18-55mm lens at 55mm)
5 of 11 Lori Grunin/CNET
ISO 400 JPEG
At ISO 400, photos still look good, with no excessive noise reduction.
(1/100 sec, f2.8, ISO 400, AWB, spot metering, 18-55mm lens at 40mm)
6 of 11 Lori Grunin/CNET
ISO 800 JPEG
At ISO 800, it still handles edges pretty well. Color noise in the raw files stays relatively fine-grained until you hit ISO 1600.
Pentax's default color settings -- dubbed Custom Image -- result in the most severe hue shifts and clipped shadows I've ever seen. This really becomes a problem when shooting in low light.
In bright illumination you can usually get away with boosting the contrast and saturation of the colors, but in low light it results in a lot of lost shadow detail and odd color shifts.
Although you can see the artifacts, which include noise-reduction effects and jaggies on high-contrast edges -- JPEG images without fine details can still be usable at ISO 1600.