I love my Olympus 2.1 megapixel, C-700 zoom ($499). It has a 10x optical zoom so it lets me get shots from a distance, but will also focus macro. This camera costs more than typical 2MB cameras because of the optical zoom. A 10x digital zoom does not match a 10x optical zoom. Software will let you zoom in to the pixel level - it's the original image capture capability that makes a difference. It came with a 8MB SmartMedia card, which will only store 7 SHQ shots (the only resolution I shoot at), but also had a rebate for a 64MB card (55 shots) which is great. Make sure you get Olympus brand SmartMedia cards if you want to use the panorama feature (lets you combine several photos into one). Battery life is acceptable, and the automatic settings allow you to take pictures easily. This camera uses SmartMedia cards (available up to 128MB), but CompactFlash cards used by other cameras are out in higher capacities.
The only thing that takes some getting used to is the shutter lag. There is 0.3 - 0.6 seconds between pushing the shutter and the picture being taken. This happens more or less with all digital cameras. It can make candid action shots difficult. This time can be lessened by prefocusing, or by bracketing your shots (take several automatically).
Why do you want the camera? If you want it to put pics on the web (or only computer monitor viewing), most any 1-2 megapixel camera will do, since you need to keep the file size down (and therefor resolution and color depth) to decrease the download time. For example, my SHQ pics run about 1 MB in file size when taken, but to post on this site they must be <150,000 bytes. Most cameras have software that allow you to compress the files, and a certain amount of compression isn't too noticable, but it does decrease the resolution. If you want to replace your film camera and print photos, you'd be better off with the 5-6 megapixel cameras. Either way, find a way to archive the original pics, then develop a file naming system to keep any modified pics under a different name. That way, you'll always have your original to go back to.
Using a video camera for still shots is a possibility, but the cameras are more bulky.