The PowerShot S45 looks pretty darn good, too:
http://www.powershot.com/powershot2/s50-45/
Do you happen to know the advantage of digital zoom? For our current camera, we keep it off. As far as I knew, it basically just guesses about what colors should belong, therefore making things blurry. Is this not basically the same thing as manually stretching the image larger on a computer? Should I only use the optical zoom, as I am now?