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don't get hung up on the megapixels of the camera.
Take a look at the Canon SD1100 if you are looking for something small and nice.
This one might be out of your price range......
I just bought a Panasonic Lumix DMC-TZ5K (for about $240 on Amazon..... strangely, the price has gone up to $269! And I got a free 4 GB SD card....). Anyway, I absolutely love it - I think it is the smallest 10X optical zoom camera and it takes really great snaps! Easy to use, too...
Don't know if you are still looking, but here is a good deal:
http://www.newegg.com/Product/Product.aspx?Item=N82E16830120256&nm_mc=EMC-IGNEFL111108&cm_mmc=EMC-IGNEFL111108-_-DigitalCameras-_-L0B-_-30120256
You are supposed to get a free SD card with it too.
It's out of stock now. Was that a NewEgg deal or something?
megapixels don't mean crap. Until i got my SLR - the best camera I ever had was a sub 2 megapixel mavica with a large CCD.
The CCD is the optical capture part of a digital camera. all the MP's in the world won't help an ultra-small CCD. the larger the CCD, the better the clarity at ALL resolutions and at all light levels.
for this reason, i'll almost always choose an olympus, in terms of ultraportables. (i like canon SLR's however)
a 5 MP camera with a large CCD and a good lense (5x optical or better) will take pictures several orders of magnitude better than a 12MP camera, with a smaller CCD and lower optical zoomage.
for entry level cameras, I like the olympus FE series. look for the 370, 380, or higher, whichever you can afford. The 370 can be had for between 100-130.00 if you shop around. they have a 1/2" (roughly) CCD, which is small compared to an SLR, but large when compared to other ultra slim, ultraportable "pocket cams" - in this segment a 1/4" or 1/3" CCD is popular... hence their utter suckage at low light levels.