Shopping for a digital camera can make your head spin! Having just gone through this (getting one for my daughter for christmas) here is what I found out. Digital zoom is not as important as optical zoom. There is some difference between a 3 mega pixal and 4, but not enough between a 4 and 5 to justify the cost, if you want something higher than 4 megapixels wait for a 6 or 7. A 3 or 4 will be fine for most people because most of us won't be printing anything bigger than 8x10's.
After all my head spinning research, I settled on the Cannon S400 elph. It seemed to fit the bill of what I was looking for and I just couldn't take researching and trying to figure the stuff out anymore LOL! It just arrived today, I can't wait to see my daughters face when she opens it!