As for the image stabilization, I guess that depends on your definition of it.
The fact is, neither the 770 SW, nor the 1030 SW, have MECHANICAL image stabilization, either lens-shift or CCD-shift. The specifications page for both cameras in the Olympus website clearly state that what these cameras use is “Digital” image stabilization... which is just another marketing euphemism for the old “ISO boost” trick... something than you can do anyway by manually increasing the ISO level, in just about any camera, with or without “digital” image stabilization. And, of course, this ISO increase comes at the cost of further degraded picture quality, whereas actual mechanical stabilization, either lens-shift or CCD-shift, doesn't compromise the image quality at all.
That said, the 1030 SW comes with several interesting improvements: wide angle, slightly larger LCD screen, slightly longer optical zoom (without compromising the lens' luminosity), face detection technology, dynamic range optimization (of the typical post-process kind, though, and not an actual improvement of the sensor's inherent dynamic range)...
... so, yes, it's something of an improvement over the older 770 SW model.
Whether those improvements are worth the price for you, only you can tell.