Hi dimsumfan, you will be able to get good results from a decent compact if it's forced to use its lowest sensitivity, but this will in turn mean a long exposure in the typical low light of a restaurant - and hence a tripod will be a necessity.
If you increase the ISO, then you will probably be able to handhold the shot, especially with IS, BUT the quality on a compact will quickly deteriorate.
You mentioned the LX3 - see this page to compare its high ISO performance with a DSLR:
http://www.cameralabs.com/reviews/Panas ... oise.shtml
But those are 100% crops of the complete image. If you look at the gallery page, you'll see shrunken images at various ISOs which may be about the size you'd use (or maybe even bigger) for your blog.
So if you're shrinking all your pics to a few hundred pixels across, you can get away with a compact even at 400 or 800 ISO. But the printed photos in the magazine will be MUCH more demanding, especially if it's reproduced more than a few inches across. If it's a pro magazine, they will want something much cleaner.
How big will the images be in the magazine and how demanding will they be?
PS - there are some pretty small DSLRs out there too, such as the Olympus E-420, although it doesn't have built-in IS. As you've identified, the Panasonic G1 is also a good prospective bet as it has a DSLR-sized sensor, allowing it to deliver lower nosie at higher sensitivities.
PPS - there may be some interesting threads in the Going Pro section - I seem to recall a member posting about food photography a while back...