if you can save up just a bit more money, I HIGHLY recomend the GoPro HD. waterproof, diveproof, crushproof, takes both HD stills and 1080P HD video, and can be programmed to automatically shoot a picture every 1, 3, 5, 10, 30, or 60 seconds. Can be mounted on anything with accessory mounts. Infinitely upgradeable.
info link and video:
http://www.goprocamera.com/hdheropreview/
still photos
http://www.goprocamera.com/photos
http://www.goprocamera.com/index.php?area=2&productid=33
Started to buy the older version last year, but heard about the HD, and may get one of those. My understanding is that the audio sucks when it's in the waterproof casing, but for things like skydiving, whitewater rafting, zipline tours, or capturing rapids in a kayak, who cares? I'd love to get all those things(and maybe caving?) on video this summer.
Right now I've got a little RCA "Small Wonder" that I end up sticking in a ziplock bag in my PFD(and sometimes get video of the inside of the PFD instead of the water). It's fine for walking around, and did a good job with all the roller coasters at Six Flags, but it's fragile, and isn't waterproof. I've already put it in the oven a couple of times to get it working again after being waterlogged.
For a regular camera, I use a 10MP Nikon CoolPix(~$80 at Wal-Mart) after having and loving the old 3MP(~$250 on sale back then!) version for years. Never had a problem with the old one 'til it got submerged in the bottom of a canoe, and in a creek. That one saw the oven a time or three, itself.
I got the ones that use AA batteries and use rechargeables for most stuff, lithiums for trips.
Have a Pelican 1010 for it, but it usually just stays in my pocket and takes a beating.
Even 4GB memory cards are cheap, now. Mine was about $16 at Wal-Mart.
Bought this Nikon on short notice, but would have probably shopped for something waterproof if I'd had more time. Used this one several times now in rain and snow with no problems, but it worries me.