Okay, last time I update this thread; I'm quite happy with this camera now:
Just have to process in Lightroom and then save as a jpeg. If you process then save as a .dng, the image once again becomes distorted. All I do is post online, so the quality difference doesn't make a... difference. I'm not sure how this camera compares to the GRDIII, but it is close enough that the ability to do 1080p time-lapses w/ CHDK and record 720p video are only bonuses. Not sure it can compare in terms of black and white quality, but I haven't shot that yet, so we'll see...