People with an interested in digital photography may want to check the new article on AnandTech about digital camera sensors:
The early sensors were also very small, developed primarily for video usage. The 1/2.7" compact sensor is 5.3x4.0mm and the larger 1/1.8" is 7.2x5.3mm - compared to 35mm at 24x36mm. These typical compact sensors are just a tiny fraction the size of 35mm sensors, and these sensors were among the largest available in P&S digital cameras. Some tried to develop proprietary systems based on a smaller sensor size with more compact lenses, but nothing caught on in the industry. The cost of early sensors was also astronomical, making the early digital SLR cameras only useful for production, high volume photography where the cost could be justified.
Finally, early digital development saw sensor resolution and size in constant evolution. With sensor size changing with each new generation, it was much easier to design a point-and-shoot camera around each new sensor generation using a dedicated and non-interchangeable lens. Until sensor size stabilized, a digital SLR that used either existing 35mm lens systems or a new "standard size" was not practical.