You can get an excellent camera for under $500.
Sony DSC W7
Nikon Coolpix 7900
Canon IXUS 700
Canon SD500
Those cameras are $400-500. They're all good pick. It depends on your personal preferences. I would do some researches and try them out at the stores before buying.
1. Megapixels, the higher the better, around 7MP maybe 8MP for less than $500
2. LCD screen. Larger is better!
3. Ease of Use. Scene Modes such as Portrait (blur out the surrounding, sharpen the object), Sport mode, Scenery, Snow... Some models have PAN mode. Try them out at the stores.
4. Rechargeable batteries and charger. Choose one which uses batteries. It's easier to change batteries than have to wait for it to be recharged.
5. Type of memory card
Here's a good site for comparing prices.
http://www.pricegrabber.com/search_...digital%20camera/sortby=priceA/popup1=/popup1[]=90:975/
There're programs like Ulead COOL 360 which lets you combine different photos into a PAN pic. very cool. For example, you can take 4-5 pictures of The Great Wall of China, using this program you can put them together into a huge PAN pic.
Ulead CD & DVD pictureshow which lets you put hundreds of photos into a DVD slide show with your own music...Let me know if you want them.