I am not like most self-important photogs who repeatedly say that sharpness in a lens doesn't matter. Fuck that. Sharpness in a lens is critically important because it widens the tolerances in which you can work. Don't frame a shot quote right? No worries. Your lens is so sharp, you can take a crop of the shot without any degradation in image quality. I know that these guys are full of shit because, right after saying sharpness doesn't matter, they will then extol the sharpness virtues of their chosen lens brand.
And truly, when doing portrait work, which takes up most of my time, sharpness is the thing that is most important to me. There is nothing like a shallow-focus portrait shot, with the face so sharply in focus that you can count pores.
But as I've been playing around with nature and landscape shots, the importance of color over sharpness has been revealed to me. Here, you can use insane apertures safely since you're using a tripod on a subject, land, that isn't moving terribly quickly. It's also here that makes me think about processing.
Anyone who has every zoomed into a shot of theirs knows what I'm talking about. Compression evinced by small blocks of horizontal and vertical lines. Color transitions that look like they've been dithered by a web browser circa-1997. A distinct lack of the rich, smoothness of color that is seen by the naked eye.
I am lead to believe that this actually has more to do with processing than the sensor. For example, I get richer transitions of color out of my old-ass Canon EOS 20d than I do my new Panasonic GF1, but that makes no sense. Likewise, the Olympus E-5 produces better, richer transitions and shades than does the Panasonic GH1/2, even though their sensors are technically superior on every level.
I wonder what algorithms are being used to take the real raw data from the camera, not the pseudo-raw data from supposed raw files, and turn that into an image. It's there that the holy grail of perfect color transitions must lie. It's also apparently a grail that camera companies don't want to give up, since the quality of shade transitions is one of the biggest differences between high and low-end cameras.