I would still buy a digital camera. The main reason is the quality of the pictures taken with the camcorder will not be as good as with a camera. For example, I think most camcorder pictures are around 1-2 megapixels right now. Fairly cheap cameras are around 6 megapixels.
Our camcorder also takes pictures but we have a couple of other cameras because we aren't that happy with the ones from the camcorder.