which one to buy-Sony DSC R1 or Panasonic FZ50

Does the larger sensor of DSC R1 make it a better choice than FZ50

Don't get the Panasonic - buy the R1. After extensive research, the R1 came out on top. See DpReview.com. Big negative to Panasonic is the Venus software and the small chip - the R1 has a huge imaging chip.

I am looking at those very two cameras myself, along with the Fuji Finepix 9100 and the Sony H5, and Canon S3 IS... man its hard, I have been doing all my research on line so it will be nice to go to a store and get hands on on these... thoughts?

Apples and oranges! The R1 has a sensor the size of digital SLRs, which means that all those pixels aren't cramped into a little sensor a fraction of that size. That means much higher resolution in real, useful terms, and a lot less noise (meaning a kind of mottled effect at higher ISO sensitivity settings. The R1 lens is amazing; it's a Carl Zeiss design, fast and capable. The R1 also favors wide-angle images, with a 24mm equivalent at the wide end. It's a brilliant camera (I own one), if a bit on the heavy side. And I use the pivoting external LCD screen all the time, turning the camera into a waist-level device.

Sony R1 is the best digital camera ever!!
but it is a discontinued model.
(if you find one) it would be more expensive than fz50.

It depends what you are looking for!!
Zoom and image stablization = fz50
wide angel, overall best features= r1

I personally bougth fz50 as the only R1 I found in my area (dubai) is a 14 months used for around $480 fz50 around $550

mbrady doesn't know what he/she is talking about. I bought a Panasonic FZ50 in May to replace my 5-year old Olympus C730UZ hoping for much better image quality, as I needed it for photographing jewellery. While it was better, it wasn't a huge difference. The difference between the FZ50 and a DSLR's (which I now own) image quality (IQ) is staggering. Since the Sony R1 beats the Canon Digital Rebel for IQ below ISO-800, it is far, far better than the FZ50 if your main priority is IQ. The 12x zoom of the FZ50 may be better if you need the reach, but ISO-3200 on that camera is absolutely horrendous, and ISO-100 on it is probably the equivalent of ISO-400 on the R1.

Sony most probably discontinued the R1 because it would compete with their Alpha DSLR.

I had the opportunity to shoot with the Panasonic FZ-50 of a friend of mine. The zoom is great. But the image quality really was not even close to that of my Sony R1. I really disliked the Panasonic way of photo processing. The FZ50 has a lot more noise reduction artefacts and still visible noise, sharpening artefacts, and not the same amount of contrast information in one and the same picture.
Before buying any of the Panazonic FZ models i would always go for an entry level DSLR or the R1.