I second what Chuck says. You really have to be careful when things start getting that cheap. Check them out real careful like and read ALL the fine print!
Hubby was looking through the ads this morning and made a suggestion for me that has me back to leaning towards a DSLR - the pocketable camcorders have come down in price and have better resolution than then most of the still camera's do in movie mode. So he was suggesting getting one of those that I can just stuff in a pocket plus a DSLR (The Nikon D60 is on special at Best Buy with two lens {yes I know kit lens aren't the best} at exactly the upper limit of the budget I was given). It would require me to remember to bring TWO cameras - but it might be a solution to getting "everything" I want.
So I'm off to learn more about pocket camcorders.
D60 10 MP D-SLR Camera with 18-55mm Vibration Reduction Nikkor Zoom Lens (D60 KIT) 8721733
55-200mm Vibration Reduction Nikkor Zoom Lens (2166) 8565368 $999.98 FOR BOTH