the more reliable sources say that it pixel drops, rather like how photoshop resizes images. this means it doesn't introduce too many noticeable artifacts.
I'm inclined to agree with you, but I've also been amused by some of the speculation (even regarding Canon) about this on the various forums:
Barry Green:
"It's been a source of raging debate since the 5D first hit, over a year and a half ago. The reigning theory is that it skips pixels and skips lines. The only thing we've been told by Canon is that they use a six-pixel bin, and don't skip lines. But those who have put it under the microscope reject that, saying that the results the Canon gets are absolutely in line with what one would expect if it was skipping two lines out of three.
And that skipping of rows and pixels, combined with the cheap downconversion hardware, results in massive aliasing and especially purple/orange moire.
The GH1 probably does some things similarly, but it's immune to the purple/orange aliasing. It has luma aliasing, but not chroma aliasing.
So, nobody really knows, and the only statement we have from anyone in the factory seems contradictory to the theories that have been put forth and tested. "
To which some cynic answered:
"Since the manufacturers don't brag about how they do it, I suppose they must have something to hide -- which strongly suggests the skipping scenario. "
Barry Green:
" Or they have trade secrets or patents on their technology, and therefore don't want to go handing those trade secrets to their competitors..."
As far as I'm concerened, it's the end results that matter. The hacked GH1 & GF1 seem to have much better video resolution than Canon and a lot less aliasing. 
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