They said if they packed too many pixels in a small sensor, they picture would be fuzzy.

Let's say the camera can take 10 mp picture. If I set the camera to 4 mp instead of 10, will that make the picture better?

 

it will be effectively be like resizing the picture in a graphics software.

and, a picture I take with my SD550 (7.1mp) looks way better than one I take with my Nikon 4500 (4mp) - but that's only because of Digic II and the sensor. The megapixel count has nothing to do with it. The SD550 could have 2.1mp and the pics will still look a lot better than the Nikon. This is because, megapixels mean nothing.

 

I am not comparing pixel counts.

The review says the picture from the G7 is not as sharp as the picture from the G6. The review says this is because they put too many pixels in the G7 small sensor.

You can set the G7 to take picture in 4mp instead of 10mp. Will this fix the problem?

 

no,

You won't be using less pixles but instead the camera will just convert the full sized raw data from the sensor to a smaller sized file. At 4 mp the image would have less detail this way.

 

The per pixel sharpness wont be as high, but the overall sharpness should be just as high if not better I would think. The bigger problem is noise as they cram more pixels onto smaller sensors.