I'm not so sure about 'giant lenses'... are the lenses much bigger than the m4/3rds kit lenses? or is the body so tiny it makes the lenses look bigger?
Probably some of both. I don't think the NEX lenses are much larger, if at all, over similar m4/3 lenses, but when attached to the camera it sure amplifies the size difference. Moreover, no interchangeable lens camera will ever be as portable as a P&S compact, so that goes to my point (excuse the pun) - it's a camera that's aimed at the P&S crowd, but also one that P&S shooters would be reluctant to actually take with them in lieu of something more portable. So to me it's left in limbo.
Still, sales numbers will tell the final chapter in this story. I could be completely wrong, but as a former (and still occasional) P&S shooter this camera would end up staying at home. IQ I think is much less of a determinant of camera system success nowadays over other factors because IQ, in general, is good enough across the board to not make it a differentiator any longer for the public at large. The differences in IQ between APS-C sensors and 4/3 sensors I think have been blown out of proportion, and only matter to a small percentage of enthusiasts like those of us who frequent these forums.