I'd say the trifecta of virtues in the current phase of the Digital Photo Revolution is: Pro-Like (DSLR/pro Rangefinder image quality and flexibility); Portable (light/small); and Shooting Satisfaction (how fun is it to use).
From my own experience, I think Nikon flopped on all three with the V1. It has something of a shot at flexibility with interchangeable lenses, but the selection is so small that it's hard to give them a lot of credit for that right now - and image quality could be a lot better. (The V1 really struggled for me in low-light environments, and even the sharp outdoor pics felt fairly flat.) Going with a small sensor didn't do a whole lot for the portability; the V1 is bulky and heavy, and while the lenses are smaller than M4/3, it's not by enough to make a big difference in carrying around a shooting kit. Finally, it's not even all that fun to shoot for me. Fast autofocus is touted as a benefit in most of the reviews I've read, but at least in my shooting, I never noticed it being significantly faster (mainly indoors, which was probably a factor); trying to get a suitably non-blurry shot indoors was a pain; controls are primitive and not nearly as nice as the X10 or Pentax Q, my two current 'most fun' cameras; and the heavy body and minimal grip made it tiring to aim and shoot.
I haven't played around with an EOS-M, so I can't say how comfortable it is to hold and shoot, or what the image quality's like. But the photos of the body design aren't inspiring (a mostly-featureless block with minimal concessions to a grip, much like the V1), having only two lenses is very limiting (I don't count adapted lenses, since most of the systems can use lenses from their bigger brothers), and the lack of physical controls is very disappointing.