I've been using a Canon G1 (3.3 Megapixel) and I love it. It takes some excellent pictures and is relatively easy to use. For $700.00 you should be able to get one along with a 128 or 256 MB compact flash card. It's been discontinued but there are still some online vendors stocking it cheap. The G2 is the replacement (4 Megapixel); check the reviews on both at DP Review as posted earlier. There are a lot people that say the G1 still takes better photos than the G2 even being a 3 MP vice the G2's 4 MP.
The key features that sold me on the Canon G1 were: swivel LCD screen (when not in use the screen is protected from being scratched), USB support, compact flash Type I AND II support (very few digicams support both), hot shoe for using an external flash, removeable lens for using a fixed length Canon lens, and at least 3 Megapixel resolution. And most importantly, the lithium-ion battery that is included lasts a hell of a long time on a single charge; it's the same one that Canon uses in some of its digital camcorders. It charges inside of the digicam which is nice. The included s/w, ZoomBrowser, is easy to use and works fine for me.
I keep my photo settings at 3 MP and using JPEG compression I can store 252 images on a single 128 MB SanDisk CF card. More pics than I care to deal with. You can also take 30 second movie clips...