I know you feel that way, Paul, and we've have discussions to that end. I accept that there are differences in the qualities of various systems, but I don't accept that those qualities should be attributed consistently to the size of the format itself.
I'm as big a fan of large sensors as anyone but I firmly believe that different lenses and camera bodies can contribute greatly to image quality. The fact that MF uses entirely different lenses and is optimized for different applications means that there are factors other than imager size that contribute. Put a 36x24 sensor in an H3 and you will still get IQ differences compared to a 1Ds.
I think comparing DX to FX (if I may use the Nikon branding) is interesting in this context. Paul, you value the shallow depth of field that FX offers compared to DX in wide angle applications. Similarly, people consistently comment that MF offers a dramatic advantage over FX in this regard. The fact is that the size ratio between DX and FX is quite similar to the MF/FX ratio. FX is 2.25 times as big as DX while MF is 2 times as big as FX. People don't generally consider the difference analogous even though it is (in fact, MF is less of a jump). I consider that to be because people romanticize MF systems and attribute magical rather than technical qualities to them. As good as FX is, there are occasions where DX is better. Same is true for larger formats.
No doubt this H3 system offers capabilities that set it apart from other systems, but these capabilities are the sum of all the engineering that goes into the product, not simply the chosen size of the imager. As underwater photographers, we have to consider not just the appealing IQ it's capable of but also the limitations imposed by the system, and I don't think anyone can argue that small lens selection isn't a huge disadvantage.
Imagine, hypothetically, that one could quantify the IQ advantages of MF over FX. What would that quantity be? 10%? 50%? 100% 500%? Depends on what you value.
In my mind, and I know this will be greeted with substantial disagreement, just such a quantitative judgement is possible and it is done all the time. That's what is done by objective testing and review sites, and because of those efforts we have a really good idea what the resolving power and IQ differences are between a 1Ds2 and a 5D or D2x is, just to name an example.
If you accept that such a quantitative judgement is possible, then you can decide objectively whether a system is more desirable after you factor in all its cons in addition to its pros. I believe that when someone objects to that type of analysis it's because he fears the results. All SLRs work the same way; with the H3 you get to use a different camera box, different shutter mechanism, and different lenses in addition to a different imager. Ultimately, this camera captures images the same way as a Canon or Nikon does.
All the benefits of the larger imager in an H3 are easily squandered when the system doesn't have the lens you need for the job or if it requires you to use an IQ-robbing teleconverter to get the shot. If the only kinds of UW photography you are interested in happen to be the strengths of the H3, then I'm sure it would be a fantastic solution. That kind of photography would be limited to rectilinear wide primes and portrait-style low magnification macro. Considering those are clearly limits of MF itself, I don't see how that could be argued.