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if $500 will do..........

the higher the pixel rate..the better.
Zoom has nothing to do with it, in fact digital zooms will often casue pixelation.
Go with an optical zoom if you can.
 
is the zoom optical or digital..digital zoom only blurs the image...

3mp has higher resolution on pictures 2048x1536 vs 2mp 1600x1200..from what I have been told 1600x1200 does very nice 4x6 and 5x7 may be a bit low for 8x10 but I can not confirm this..3mp will print real nice 8x10

I would assume if 3mp camera will give a sharper image than 2mp camera in 5x7...

I just got a toshiba pdr-m71 and printed 3.5x5 photo..I can get 4 of these on 8x11 photo paper and the picture looks great

do not get sucked in by a high digital zoom make sure it is optical zoom...truly from the lens..I believe the digital is a software enhancement
 
A great deal depends on the quality of the optics! I have seen pictures taken with an Oly 2020(2.2),that were much better than an Hp 3+ mp camera.I think we might be able to give a better recommendation if we knew which cameras you want to know about.Olympus,Nikon and Canon have very good optics.
 
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