However, in the long run I have some real and serious doubts that this new strategy will allow them to keep up with the likes of the Nikon D-80, the Canon XTi, and the Pentax K10.
I don't see why not.
I don't see them being there with the "big 2" in every segment. That comparison sounds like a bit of CEO puffery. But they should be reasonably competitve in the segments they do target.
Right now, that likely means the E-400 competing well with the D40 and XTi. And the E-330 having it's own strong niche with live view. It remains to be seen how ambitious they are with an E-330 succesor.
As for the E3, I think some will be disappointed if it isn't a step above a D-80 or K10D. I also won't be surprised if it's priced somewhat higher. That might mean to some degree it's another niche market.
In the long run though, I believe a 4/3" sensor size ought to be very competitive, and might even provide some advantage to Olympus in the likely largest growing market segment for DSLR purchasers. But there won't likely be any advantage in 2007 (excepting perhaps in a small segment of the market).
And, even when there is, maybe a couple years down the road, it won't be large. There really isn't *that* much difference in size between the 4/3" and APS sensors. In theory, the Canon 1.6 crop factor CMOS sensors might be expected to have more noise than the larger 1.5 crop Sony sensors used by Nikon and Pentax. In practice, Canon has a technological edge which makes the size difference meaningless .
But, if Olympus were to flounder, I don't think the fault would be the format, or the size of the sensor.