It is up to you what size camera you want to carry around, choosing the right type of case helps as well. I used to have a big case for my camera then purchased one that comfortably fit (like a "V" shape), made quite a difference.
If you can afford it I would seriously consider a digital SLR. The point and shoot cameras are slow to focus, don't handle low light well and the images aren't as clean. The sensor size on a point and shoot is a tiny 8.8x6.6mm vs 24x16mm and up on SLR's. This is why a 6 megapixel image on a SLR is equal to or better than that of a 8 megapixel point and shoot.
As for the Canon Rebel...
It is a pretty good camera but the Nikon D70 really outperforms it. Every single review points out that the Nikon is a better camera. Canon's Rebel comes with a rather cheap lens, it is very slow to start up (the Nikon is ready instantly) and they cut quite a few corners in bringing this model in. The Nikon was a 2 year from scratch effort and the D70 is considered better than the D100 which is quite a bit more expensive. Just pick up the two cameras and you will notice the difference.
If you a Canon fan or have a lot of Canon lenses I recommend looking at the 20D, it gives the Nikon D70 a run for the money.