The real difference is going to be weight (G9 is going to be a lighter package and like many things you don't realize the weight advantage till you've carried one around all day) and focus speed (350 is going to lock on focus faster, especially on moving targets).

Now mind you, if you take the speed of the 350, lenses get expensive and you have to be at least semi serious about your photos for it to make sense. A decent zoom lens is going to run you 300-500 on top of the camera. Good lenses get a lot more expensive than that. And every 2 years or so, there is a fairly better camera out that may have you wanting it, over your old one.

I have a 40D myself and had the 350 before that. Yet for snap around shots in the house, we keep a small Canon digital around, so I know personally, that it's handy to have the small camera.

If you don't take photos all the time of moving topics (i.e. kids sports) then I'd go for the G9. You save money (which then buys you the NEXT camera in a few years) and you gain portability and great pics without going overboard. I think, on a guess, that by simply asking the question, you are probably going to find the G9 a nice camera to use, to get familiar with the things you use and don't use and if "someday" you want to move up, then you can. My bet is that you'll happily use that until there is a G10 or G11 and you'd be happier upgrading every couple of years rather than investing in much heavier DSLR equipment that won't give you a ton of things you actually use.

So I'd say G9, but hopefully I've given you enough to think about in this that you can override that vote if you feel somehow there are things you prefer in the 350.