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philharris:
I agree with shmokes  - a DSLR is not the way to go. As well as being bigger and much more expensive, changing lenses is a nusciance and it is not practical for family photos. As drventure says, you also need a camera that takes AA batteries, and if you have other cameras in the house it would be helpful if they all use the same memory cards (eg SD/Compact flash).

Other than the s90, the other thing to consider is an extended zoom camera - this gives you more zoom, which may or may not be of interest, but it will be bigger and heavier. I had a fuji s5700 a while back and the replacement model seems to be this:
http://www.walmart.com/ip/Fujifilm-FUJIFILM-S2940/15819289
which is $169 in Walmart.

stu33:
I'm a semi-pro photographer, my other hobby besides this one.  As much as I love my Canon DSLRs (currently a 7D and a Rebel XT as a backup), I would second the point and shoot recommendation.  Unless you're looking to seriously get into photography as a hobby and plan on spending a huuuuuge amount of cash on it over time, go with a p+s.  Trust me, once you get into DSLR, it's a slippery slope, and dropping 530 bucks on a flash and 1300 for a 17-40mm L lens will not seem like a big deal to you pretty quickly.

Just make sure to read as many reviews as you can, and really think about what type of photos you're going to be taking most often.  If your focus will be indoors, you're going to want something quite a bit different than if you're planning on shooting a bunch of outdoor sports.

And stick with a major manufacturer.  Canon, Nikon, Sony (although I would never buy a Sony, personally...but that's another story) are all good ones.  Fuji makes some really good p+s shoot models too.  Their Fuji S700 for a looong time was a very nice p+s.

TopJimmyCooks:
To help the OP:  read Kenrockwell.com on recommended cameras and why.  If I had to stick to $300 I agree with the S90 recommendation above.  I think it's S95 now but some 90's are still for sale.  

However, if you really want good action pics of your kids, a low end dslr like a Nikon 3100 will be way better to shoot.  low light ability, no shutter lag (i.e. on some point/shoots you hit the button and it takes half a sec before capturing), large cache (on point/shoots it takes half a sec before it will take another pic due to writing to the card) all make it way easier to shoot kids, sports, events, parties and not miss your capture.  you never have to change lenses if you don't want to, and it's full auto if you want it that way.  The dslr batteries are good for a week at disneyworld/1200 pics without recharging, that's better than buying a 2 pack of AA's from mickey for $11.  For a point/shoot, AA's are the way to go.  If you go SD card for storage (recommended) you have the option of wirelessly transmitting your pics to your computer which is cool.

It's a complex decision-do some research, read some reviews, carry around some type of borrowed camera for a while and see what you think.  Good news is the standard of quality and function for cameras is pretty high right now so it's tough to make a bad decision on hardware.  

stu33:
Agree on Kenrockwell site.  Very good reviews.  I also like steves-digicams.com.

bishmasterb:
Third the kenwrockwell.com recommendation. He saved me hundreds of dollars when I bought my camera.

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