I just went through all this a few months ago and it's mind boggling. I also sell 'em.
Couple things to look for. Get at least 2 megapixels, more is better.
For small (ie 3x5 or 4x6") pics or low resolution pics for the web, a 1.2 megapixel will do good enough. Any pic's larger than that, and pic quality will suffer. When you get one, everyone will want to use it to send email pics, family pics, etc.
Look for a macro zoom setting since you will want close up's of your knives. If it doesn't have a macro setting, (many don't), look at the minimum focal length, you'll want a minimum of no more than 12".
A macro setting will allow close ups of just a few inches in many cases. This makes for neat looking pics of your knives.
Look for optical zoom and not just digital zoom. The digital zoom just enlarges and crops what your optical zoom captures. Optical is better. Many have combination optical and digital. These are fine.
Don't forget battery life. These things flat eat batteries up. Plan on getting two sets of rechargeables, so there's another $50.
Expect to spend at least another $50 to $100 for photo editing software. If your camera comes bundled with good (ask the salesman)photo software; that matters, most come with very minimal software.
Memory that comes with the camera is another gotcha. 16 megs is minimal. That is about 12 pic's at maximum resolution. Another 32 meg card(chip, stick)will help. There's another $30 to $50 depending on what kind of memory it needs.
Microsoft and Adobe both have photo editing software for $100 that works quite well and doesn't take a computer science degree to operate. Paint Shop Pro is also around a $100 and will do (a lot)more but is less (a lot) intuitive to use.
A pic taken using a $40 tripod with a cheap camera will often look better than one taken with a more expensive camera and no tripod.
Hope that helps. Good luck.