Under the right circumstances, today's small sensor cameras can produce magnificent photographs. I've been increasingly impressed with my new Panasonic LX7; at first I was wary, as it 'only' had a small sensor. But it produces colours that are more to my liking than I ever thought a small sensor camera could create, and the sharpness of the lens is superb. If it was as ergonomically good and comfortable as the Ricoh GRD/GR, it would be as close to perfect as a small sensor cam could be for me.
Could I do professional work with it? Depends on the subject, the client, the situation and the output media. I'd happily use it for web sized images of brightly coloured, outdoor settings. With exposure bracketing and the Enfuse plugin for Lightroom, it could interiors, as long as the output was still for the web. Exhibition sized prints? Not so sure, but I'd certainly have a go.
As far as small sensor cameras go, I've stopped using everything else now that I've got the LX7. I've tested it against the Canon S90, Fuji X10 and Ricoh GRD III, and it comes out better than all of them, in terms of detail, colour, and even dynamic range. If I expose carefully and choose the right subjects and scenes, the LX7 is almost indistinguishable from the Canon 30D + 17-55mm f2.8. The giveaway factor is noise: the LX7 is visibly noisy at ISO 400 where the Canon 30D has almost none. But for general shooting, I can happily walk out with the LX7 and create images that I like.