I'v had a few digicams and just bought a Sony DSC-P200 for that kind of money from Jessops. Its the size of a cellphone but with a Zeiss lens and 7.2 Megapixles!
By chance I've just been looking at the same sort of price range machines for my sister. Recommend you have a look at the Panasonic Lumix FX7 and the Sony W series as well as the P200.