With film and developing at about $8-10 a pop for 36 exposures, it doesn't take long to realize it makes more sense to get a $200-300 digital camera instead of a $100 film camera if you little guy is really into taking pictures and won't lose the darn thing. Pays back after about 10 rolls.
Besides price, having had our kids use these things there are a couple of other criteria, first some basics. I used "DPReview":http://dpreview.com and "Digical Camera Info":http://www.digitalcamerainfo.com/, and to a lesser extent the less technical reviews at "Imaging Resource":http://www.imaging-resource.com/WB/WB.HTM" "DCresource":http://dcresource.com, "stevesdigicam.com":http://stevesdigicam.com and "Megapixel":http://www.megapixel.net/html/reviews.php. Most print publications don't cover these lower end cameras, so use these. Here are some criteria:
* Resolution. Right now, I don't think you really want anything less than 5 megapixels. This lets you blow up a shot to say 8x10 with little trouble. 4 megapixel camera are much cheaper still and are a pretty good budget model if you can find them.
* Picture Quality. Ok, if you are going to spend the money it would be nice to know that the pictures won't come out "red" all the time. So some basic level of quality here.
* Memory Card Costs. Kids take pictures at an amazing rate. They love to snap whatever they see, so investing in a pretty big card ironically makes more sense with kids if you really want to see things the way they do. I'd say 256MB at least and probably 512MB is in the sweetspot pricing wise right now. Don't skimp.
* Size. Kids don't need big bulky cameras. There are two size levels, ultracompact that are a little bit bigger than a credit card. And, compact which are about 3.5"-4" long and about 2" thick. These latter sort use AA batteries so are cheaper.
* Optical Viewfinder. It may be just me, but I find them useful maybe I'm old fashioned, but mainly because in bright light, the screens don't work well (certainly true for our SD500). Also with a low battery its a probably. On the other hand, most viewfinders in these compacts don't work well. They show only 75% of the image so you don't compose too well. Most cameras seem to be stamping viewfinders out as the screens on the back get bigger.
The some common features that are even more important for kids:
* Shutter Lag. This really drives the young photographer crazy. So it probably limits you to the later models since shutter lag has really only gotten to be acceptable in the last 12 months or so.
* Durability. Is this thing going to fall apart after being dropped a few times or being spashed on. Made me want to look at models like the "Pentax Optio WP":http://www.digitalcamerainfo.com/content/Pentax-OptioWP-Digital-Camera-Review-.htm because they are waterproof to 5 feet under. Too bad that particular model has such poor color quality.
* Anti-shake. This is really only in high end models now which is a little ironic since the folks who need it most are the newbie photographers. Certainly, its the number one reason why our kids shots don't come out. Only the high end cameras like the Casio Exlim EX-Z750 have it it appears though.
* Screen size. This matters quite a bit for these little guys. They just love to show off the picture when they've just taken it. 1.5" is just too small, so 2" is ideal, but expensive.
Net, net, the choices are getting a low cost but high quality Panasonic Lumix DMC-LZ2 for $220, main drawbacks are relatively noisy, so use at ISO 100 and no optical viewfinder, Pentax Optio S5Z because its small even though images aren't too great for $255 or to splurge get the Fujifilm Fuji F-10 for $270 ($30 rebate from $300 street) with fantastic image quality rivaling digital SLRs, but its a bit out of the price range.
So with that being said, in ultracompacts, it is hard to get the 5Mp camera and be an ultracompact for $200 or so, but here are some choices:
* "Canon SD400":http://www.dpreview.com/reviews/canonsd400/. This is the baby brother of the SD500. $330 street for 5 megapixels, so a little on the high side. 2" screen, 0.4 second full press, ISO 100 quality, shutter lag. Low distortion lense. Buy it if you can afford it.
* "Canon SD300":http://www.imaging-resource.com/PRODS/SD300/SD3A.HTM. 4Mp, 2" screen, 1200 lines resolution/inch (so very good for 4Mp). Very good color. $280 street so still on the high side.
* "Pentax Optio S5Z":http://www.steves-digicams.com/2005_reviews/optios5z.html. This is just an update to the "S5i":http://www.dpreview.com/reviews/pentaxs5i/ and "Imaging Resource":http://www.imaging-resource.com/PRODS/S5I/S5IA.HTM with a 2.5" screen. It is $255 street. It has decent picture quality (1200 lines) and is tiny. Its main drawback is that it doesn't have an optical viewfinder.
* "Kodak EasyShare V550":http://www.imaging-resource.com/PRODS/V550/V550A.HTM. Kodak's first ultracompact. Decent and new, 1200 line resolution for 5Mp so a little low and decent color. ISO 200 maximum. It's a little too highly saturated, so targeted more towards average users. And too expensive at $350.
* "Pentax Optio WP":http://www.digitalcamerainfo.com/content/Pentax-OptioWP-Digital-Camera-Review-.htm if the picture quality wasn't so poor because it is waterproof. The real show stopper is that the color reproduction is way off and although it says it is 5MP camera, it effectively is just 3MP because of inferior lense etc. Also its auto ISO feature doesn't work well, you should just set to ISO 100 and shutter lag is about 0.46 seconds so pretty high. The optics really do matter on these cameras, so you pay more to get higher quality optics so you can actually use all those pixels. It's also a little expensive at about $270-300.
Compact size so somewhat bigger, but lower cost, so it is quite possible to get a $200-250 5 Mp camera:
* "Fuji F10":http://www.imaging-resource.com/PRODS/F10/F10A.HTM, "DP Review":http://www.dpreview.com/reviews/fujifilmf10zoom/, "DC Resource":http://www.dcresource.com/reviews/fuji/finepix_f10-review/, "Digital Camera Info":http://www.digitalcamerainfo.com/content/Fujifilm-FinePix-F10-Digital-Camera-Review-.htm and "Megapixel":http://www.megapixel.net/reviews/fuji-f10/f10-gen.php Probably too expensive at $270 street for this 6Mp ultracompact, but it rivals a 8Mp Digital SLR. Resolution of 1400 lines vs. 1250 typical for 5Mp cameras. Using a slightly different test, DP Review shows 1650 lph vs. 1550 for the SD500 and 1500 for the Nikon 7900. And DCCameraInfo with yet another test found it used 5.47Mp vs. 5.28 Mp for the SD500. Very good color balance although DCCameraInfo found it just average with the typical red shift. Very low noise up to ISO 400 which is amazing for a small camera but you have to use manual ISO not full auto mode to get this. It uses a 6MP imager. It's an update to the bulkier E550 below. Very little lense distortion. Its 3.6" x 2.3" x 1.1" so not a true ultracompact, but very small as a compact. 7.1 ounces. Aperture and shutter priority as well. $304 street, so buy it if you can afford it for probably one of the best compacts around right now. Fast at 0.5 second full shutter lag. In fact, it beats the SD500 in head to head tests. Main drawbacks confusing menus, no optical viewfinder and has a big ugly dongle to charge and connect to the computer. The optical viewfinder is probably the biggest of all the issues and the price too. The high ISO by the way acts as a kind of blur control since a given image can be taken at a higher shutter speed.
* "Panasonic DMC-LZ2":http://www.dpreview.com/reviews/panasoniclz2/ "Imaging Resource":http://www.imaging-resource.com/PRODS/LZ2/LZ2A.HTM and "Megapixel":http://www.megapixel.net/reviews/panasonic-lz2/lz2-gen.php. This is another 5MP camera at $230 street. It is quite a bit bigger than the SD400 at 4"x2.5"x1.3" but it uses standard AA batteries (or a lithium CRV-2 or a rechargeable NiMH) which is great for kids. Pretty good color accuracy and average resolution (1350 lines). It is 6x zoom as well that's low distortion too. Does have 0.8 second shutter lag which is quite a lot because autofocus takes a while. Far bit of noise even at ISO 100. Soft corners at its very high 6x telephoto end. Most important, it has image stabilization that seems to work well. The main drawback is that it also lacks an optical viewfinder.
* "Fuji E550":http://www.digitalcamerainfo.com/content/Fuji-FinePix-E550-Digital-Camera-Review.htm. This is a 6MP camera for just $270 street. Very high color accuracy and good real resolution at about 5MP effective. It's auto ISO doesn't work well, so use manual ISO 100. It is also very fast. It has both shutter and aperature priority as well.
* "Nikon 5900":http://www.imaging-resource.com/PRODS/CP5900/CP59A.HTM. 5MP compact camera $260 list so a little high uses 2 AA batteries. Default is a little over saturated, but you can adjust this and OK resolution (1200 lpi)
* "Canon A95":http://www.imaging-resource.com/PRODS/A95/A95A.HTM, "DP Review":http://www.dpreview.com/reviews/canona95/ and "Imaging Resource":http://www.imaging-resource.com/PRODS/A95/A95A.HTM. $270 street, but good, but not superb image quality (1350 lines) and good color. Big and heavy at 12 ounces since it has four AA batteries an uses the older CF. 5Mp overall with great quality. Also has shutter and aperature priority.
* "Fujifilm E510":http://www.digitalcamerainfo.com/content/HOLDAY-BUYERS-GUIDE.htm. It is just $200 street and has aperature and shutter priority so has more controls than a high end SD500 for example. Like the DMC-LZ2, it lacks AF illuminator so is poor at low light according to "DC Resource":http://www.dcresource.com/reviews/fuji/finepix_e510-review/. Not as nice as the Canon A520 for instance, but inexpensive. Image quality though is below average, soft and there is purple fringing.
* "Optio S55":http://www.steves-digicams.com/2005_reviews/optios55.html and "Digital Camera Info":http://www.digitalcamerainfo.com/content/Pentax-Optio-S55-Digital-Camera-Review.htm. LIke the S5Z, it doesn't have a manual viewfinder though. $220 street so the right price. It is a little sluggish though at 0.8 full shutter lag. It also is quite inaccurate color-wise, the Olympus D-425 another $200 camera is much better. It is low resolution with 2.78Mp effective so 8x10s are a push.