I just purchased the Cannon S400 Coach Edition and what's super kewl is I can do actual video with sound or still frame on one Gizzmo :P (That's my kitty's name). I spent 799.00 at Good Guys.
What came with it was a Coach case for the Camera (A MUST)and an additional memory card. I bought it because I was going on a fishing trip and was wasting film on bad pictures. On a digital you can actually edit what you do and don't want.
The software is awesome to. You can create Mini movies. NORTY WOULD LOVE THAT WITH ALL THE IMAGERY THAT HE DOES. ;) :P

Here's a pic of a fish I caught... The little punk took off right when I got the hook out of his mouth. I wanted a picture holding him but he was to fast.

Oh and you don't want anything less the 4.0 (mega pixel's because the quality of the picture totally suffers and the size of the print is limited. Right now Cannon Digital Camera's are the pick of the litter)

I have an Olympus C-4040 that I've been really happy with. I just did a search on it the best price i found was $380 but i didn't try ebay. The only thing I was told when looking to buy one was to get one from a major camera manufacturer. If you buy one from a company like ezonics like i just saw you probably won't be happy with it.