I always take my laptop to WDW with me to download my pics. I also burn them to a DVD before I pack up to go home, just in case my laptop were damaged or lost in transit.
Lots of folks in this thread have mentioned buying "an" extra card.
Forget buying just one extra big card. Instead, buy several smaller cards. They're often cheaper than the larger cards, and most importantly - you can split your trip photos up more on many smaller cards, and if you lose a card, you lose fewer pics.
I think it's best to have one card for each day of your trip, and put the full ones in your room safe. Then, if your camera gets lost, stolen, or goes for a swim on POTC, you only risk losing one days pics instead of your whole trip.
No, you can't upload your own pics to your PhotoPass account from the parks.
And even if you could, any pics that you upload to your account are not on the CD when you buy it; only the pics taken by the PhotoPass photographers are included on your PhotoPass CD.
I've been taking an SLR to the parks since 1999. I was just as scared on that first trip, but it only took a few days to realize that A) with some basic precautions, the camera is perfectly safe, B) my photos are a hundred times better with my SLR than with any P&S camera I ever owned, and C) buying an SLR then not using it for the most important photo-taking occasion of the year (your WDW vacation) is a tremendous waste of money.
The size of an SLR can present some challenges, however, since you have to carry it around all day, every day, for a week-long triip. But the best advice I can give you is to get a single good walkaround lens, and don't try bringing the whole camera bag with you. Just bring a spare battery, some spare memory cards, a cleaning cloth, and maybe a filter or two. In other words, just pocket-size stuff.
Rain and water rides are easy to defend against - all you need is a camera poncho - also known as a 1-gallon Ziploc bag! Here's how to make one in about 30 seconds:
http://willcad.org/image_cameraponcho.shtml
You are correct - all of the Walgreens stores in the WDW area have 24-hour photo labs that will burn pics to CD for only $4 per disk, for as many pics as the disk will hold.