We ended up with the Panasonic Lumix DMC-LZ3. It's a 5MP, 6x optical zoom camera, and it's small enough to throw into a fanny pack. Plusses are: video recording, several auto modes, 2" LCD (we would have liked 2.5 or 3", but you start shelling out lots more for that) and something that I'm thrilled about - two levels of auto image stabilization.
Here are the first shots:
Look, I pulled up half the monkey grass!