I just got my daughter a Canon G10. It's not the smallest, but for a point and shoot, its really a nice camera.
It has a nice lens, IS, short shutter lag, and takes great pics. It also makes it very easy to do some things like exposure compensation and ISO changes.
The thing is built like a tank, with a metal body.
Basically, if you aren't happy with the Nikon's pics, you will probably be disappointed with the other P & S cameras as well.
I would go to a camera store that sells this camera and check it out. When my daughter first got it, she was bummed because it isn't a cute/cool camera like the ones with Ashton Kutcher in the ads. So I said, "fine, lets take it back to the camera store and you can pick one you like." After she had a chance to play with all the cameras there, she realized how this one really takes better pictures, and she ended up keeping that one. Now she loves taking photos with her G10.
Regards,
Boris