I have a Nikon D300 DSLR and a fairly large kit that I take everywhere. I even took it to Castaway Cay in 2010, but was not too comfortable in using it near the water or in the sand. I don't have a decent point and shoot, so my quest last year was to find a good point and shoot that also is water proof. I wound up getting a Panasonic Lumix TS3 and was real pleased with it. Took it to WDW and the Keys last year for summer vacation. It worked great but UNFORTUNATELY it leaked!! However, Panasonic has a 1 year full warranty, and they sent me a new one no questions asked. So this year when we go to WDW and Vero Beach hopefully it won't leak!
The problem for me was that after shooting DSLRs for over 6 years, and getting used to that level of sharpness, low noise and lack of shutter lag, going to any point and shoot under $400 - $500 wasn't getting me the quality I wanted. Over the past 2 years the water proof point and shoots have improved dramatically in image quality, zoom range and noise reduction; the current quality you get from them is like what you could get from a good point and shoot 2 years ago, so I feel like I am compromising less. Plus it also shoots HD video, which is great to have both underwater and on the beach.
The problem for me was that after shooting DSLRs for over 6 years, and getting used to that level of sharpness, low noise and lack of shutter lag, going to any point and shoot under $400 - $500 wasn't getting me the quality I wanted. Over the past 2 years the water proof point and shoots have improved dramatically in image quality, zoom range and noise reduction; the current quality you get from them is like what you could get from a good point and shoot 2 years ago, so I feel like I am compromising less. Plus it also shoots HD video, which is great to have both underwater and on the beach.