Source: Tom's Guide | Keywords: Olympus, DSLR, Hybrids | Themes: Digital Cameras
2. Image Quality
There are several components that make up the area of image quality: How well the camera accurately records the color of the subject matter; how well the camera produces a faithful reproduction of the subject; whether the camera generates an unwanted color cast, such as a jaundiced or blue-tinted skin; how well the camera captures image details in shadows or low-light conditions; how susceptible the camera is to image noise, such as whether Aunt Margaret’s skin looks like she has advancing age spots when she’s only thirty-two years old; and how well the camera properly focuses on the intended subject.
The Olympus E-420 does admirably well in several of these areas. In the GretagMacbeth ColorChecker chart, the text at the bottom of the chart is in focus and easily readable. The skin tone wedges in the upper left are an accurate representation of the actual colors. The wedges on the third row are also accurate depictions of the RGB (red, green and blue) and CMYK (cyan, magenta, yellow and black) color spaces.
When we examine the signal-to-noise ratio in the neutral gray wedges on the bottom row, we see that the Olympus E-420 does a good job, with the Std. Dev. (standard deviation) numbers averaging around 1.96. (The best cameras will have a Std. Dev. value of less than 1.0, indicating that there is a very low signal-to-noise ratio in the image.) Based on these criteria, we rate the E-420’s image quality at four on a five-point scale.
The SP-565UZ is every bit as good as the E-420 when it comes to color fidelity; the skin-tone wedges on the ColorChecker image captured by the SP-565UZ appear to have equal representation as the same wedges in the images captured by the E-420. The wedges representing the two major color spaces (RGB and CMYK) also appear as they should. Since computer monitors are only able to display information in the RGB color space, the fact that the SP-565UZ does a good job with the CMYK space speaks well for it’s abilities. The camera seems intended for a wider audience than simply those who will view its images on a computer monitor. 
Both the SP-565UZ and the E-420 have little difficulty in focusing on the subjects in front of them. Since the text running along the bottom of the ColorChecker chart, shot by the SP-565UZ, is captured in focus, a photographer should easily be able to sharpen the edges of the text using image-manipulation software.
Unfortunately, when it comes to the signal-to-noise ratio criteria, the SP-565UZ fails miserably. We shot several images of the ColorChecker at all of its ISO settings—ranging from ISO 64 to ISO 1600. Where we had hoped to find the Std. Dev. value closer to that of the E-420’s 1.96, we found the SP-565UZ to have Std. Dev. values of around 6.1—over three-times higher than that of the E-420. Moving up to each succeeding ISO value only made things appear even worse. By the time we looked at the ISO 1600 image, it was difficult to determine whether the neutral gray wedge was a solid gray or a shaded gray. For this aspect of image quality, we rate the SP-565UZ a 1 out of 5.
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I use an Olympus E-500 and it works wonderful. While I have not used 420 I can say the the Lenses Available for it are nice lenses
i sell both models. don't forget e-420 is a d-slr, which has a much larger sensor resulting in lesser noise and higher estate of light-accepting element - the seonsor matrix. but it's an enry level model with no image stabilizer, unless you put expensive stablizing optics..
sp565uz is a universal camera with a small sensor but high versatility plus image stabilizer. but the noise levels are usually higher. and it has extremely high iso, but inly in 3mp mode.
Olympus SP-565UZ is NOT a DSLR, its a point and shoot with a huge lens (or a megazoom, if you prefer the term).
i sell both models. don't forget e-420 is a d-slr, which has a much larger sensor resulting in lesser noise and higher estate of light-accepting element - the seonsor matrix.
according to this article the Olympus SP-565UZ is a DSLR as well, which is wrong. that's a pretty silly mistake to make, anyone can tell an SLR from a non-SLR.