Panasonic DSLR

The current L1 was introduced last year and it utilized a 4/3 sensor
size ( 18x13.5mm). Anyone has any idea if Panasonic plans to update
the L1 and starts using larger size sensor? Or is the 4/3 sensor works
just fine with the specially design Leica lens? I think the current
L1 is also less than 10 MP camera.
How did the L1 lens system ended up with the Four third system lens
that also fit for the Olympus Zuikor lenses in Olympus Evolt 330? The
L1 looks similar to the Olympus E-volt 330. Was it actually developed
jointly between the two companies? Does other camera utilize the Four
third system? German Leica or Contax, perhaps? Does Leica or Contax
make DSLR?

The 4/3 system is what it is.
For the vast majority of users sensor size is really an insignificant issue.
Olympus and Panasonic/Leica use the 4/3 system which means they share the
lens mount. Sharing a lens mount is an anathema to companies like Canon and
Nikon with their proprietary lens catalogs.
Because of small market share, rather than any technical short-comings, the
long term viability of the 4/3 system is dubious but not yet on life
support.
Olympus was out of the SLR market for the entire autofocus era and so had no
installed base of lens users when they entered the dSLR market. That is a
formidable marketing obstacle. I believe they currently have much less than
5% of the market.
Panasonic must have paid dearly for access to the Leica name. Leica was
sorely in need of a cash transfusion so Panasonic/Matsushita may have more
than a licensing deal, they may now own a chunk of Leica. Leica is not just
a camera company but makes precision optical and other gear for a variety of
fields.
Kyocera was an early dSLR marketer under the Contax name. However they have
since entirely retired the Contax camera brand line.
Leica does not make a dSLR per se. They briefly marketed a digital back for
their film SLR. Leica has never been a player in the film SLR market
comparable to their deservedly prestigious rangefinder line. I believe
Panasonic has plans to market a Leica badged cloned version of their 4/3
dSLR; the Panasonic version already carries a Leica badged/Leica priced
lens. I believe that is a mistaken use of the Leica name.
Leica would be better off selling a dedicated dSLR body, which could be
outsourced to Nikon/Sony/Canon et al, that uses its existing base of manual
focus dSLR lenses. Not having autofocus would be a marketing niche for
Leicaholics. Compared to their rangefinder lenses Leica SLR are lenses are
almost "reasonably" priced.