My reasons...
The build quality is actually much different. Examine the two together.
You are partially correct. The D-Lux 3 is 99% Panasonic. It costs more than the Panasonic. It does come with an extended warranty and of course it comes with that little red dot which means nothing to me other than allowing me grudging entrance to to post in Leica forums. I like Leica forums because the pixelpeeping is much lower and there is more emphasis on photography, the image, rather than the gear. Much different than Canon and Nikon forums. So maybe that also has some value.
I must say the two cameras were both held in my hands prior to the purchase of the Leica version. Why did I buy it? It felt better, it looked better (I like clean lines) and the build (external) appeared to be better to me.
I use cameras like I use tools and when I buy tools I buy them based on functionality first followed by asthetics and more importantly, how it feels in my hands. The D-Lux 3 felt much better in my hands than its Panasonic brother. It was my first compact camera purchase driven mainly for the 16:9 aspect ratio. I have grown to love it.. it allows you to tell more of a story at times and it can be very dramatic.
Then, there is also resale value to consider. The D-Lux 3 will hold more value just because of that stupid red dot and its clean lines than the Panasonic. It might be stupid.. but it's true. Check out eBay or Craig's List if you don't believe me. When it's time to sell a camera we all desire to get as much as possible don't we?
Take an image of the same scene from each camera and I could not tell you which one came from which camera... but ask me which camera I would prefer using and I would say the D-Lux 3. Why? Because we each like what we like. This requires no logic. It requires no reason. We just like what we like.
Some say the Leica is a status camera. Not in the circles I travel in. In fact, most people who have seen my D-Lux 3 in my hands don't even recognize the brand.. so much for status. To most of my friends Nikon or Canon are the status cameras.
I hope this answers a few of the questions raised here. This is my first post here. A friend of mine directed me to this thread and I thought I would add to it.
Jim Radcliffe