I was in a similar situation to yours. I ended up getting a Lumix TS1 for $340 (higher than your budget) but maybe what I learned along the way can help you.
I was originally planning to get a Creative Vado so I could have a small, handy way to take 720p video without carrying my Canon HV30 and gear with me everywhere I went. I still take my HV30 to places/events where I plan to take good video but I realized I was leaving it at home more often than not. And missing out on some fun videos (well, I was taking lots of video with my P&S camera at 640x480, but I wanted HD).
After deciding on the Vado, I realized I would still be carrying two pieces of gear, as I always take my P&S wherever I go. I ended up looking for a decent P&S that could do 720p.
Originally I looked at the Canon SD780 ($230) and the SD960 ($270). Both are new models that can do 720p. After reading some reviews, the SD780 picture quality didn't look that great. It may still be acceptable to you and the form factor is pretty awesome, but a lot of people weren't happy with it. The SD960 is supposedly better and it has a wide angle lens, but it's a bit bigger than the SD780. If I had to choose between these two, I'd get the SD960 for sure.
I've been a Canon man pretty much my whole life. Not on purpose tho. I pretty much research everything depending on my needs, performance and price range and Canon usually came out tops. After reading about the so-so quality on the SD780, I looked into some Panasonic Lumix reviews and it looks like I've been missing out. Reviews were great.
As a primarily video man, familiar with AVCHD, I was interested in the first two cameras to take HD video in AVCHD, the Lumix ZS3 ($400) and TS1 ($340). The ZS3 is pretty spectacular from what I've read. It even records HD in Dolby Digital 2.0 stereo. I will probably end up getting a ZS3 for the 12x+ optical zoom, on top of the TS1 I just purchased.
I ended up getting the TS1 because of it's "ruggedized" features, being waterproof, dustproof, shockproof. I wasn't planning on this type of camera, but I realized it was exactly what I needed. The places I don't take my HD camcorder are places like the beach, the pool, boating, snowboarding, etc. A lot of times I can't bring out my P&S either. The TS1 lets me take pics and video without worrying about it. Reviews have been excellent.
A lot of older Lumix models have 720p capability also (in motion JPEG, not AVCHD). Check out some of the TZx models. TZ5's can be had for around $200 used/Ebay. The LX3 takes great video also but it's a bit pricey and I wouldn't consider it a P&S, more like a compact camera.
If you have a camera in mind, search for that model on YouTube/Vimeo. You'll find sample video clips for sure. My only must have recommendation for a 720p camera is the ability to use the optical zoom while taking video. A lot of older ones will not let you zoom in/out once you start recording which sucks.