I bought our Olympus 490D 3 yrs. ago by product reputation & feel. I was not disappointed. I will be upgrading to another Olympus shortly, as I am so pleased with their camera line.
My only concern about Sony memory sticks is ~ remember SONY VCRs & Beta tape... never caught on ... SONY makes a nice product, but for me, the memory stick is an issue.
Brands like Olympus, Nikon, Canon, FUJI, etc.. use memory, compact flash & the new XD cards, which are easy to use, affordable & reliable. Olympus does require you use a proprietary card for panoramic pics, but they usually come with one, so that's not a problem- switch it in & out of your camera when you want panoramics- connect with the software later... The nice thing about digital cards is no worries about airport X ray machines & lots of picture storage on one card- a couple of 64MB, or 128MBs are great for vacation. No laptops for downloads are required!
Buy a camera with the most MP available in your price range. As you said, technology changes so quickly. Our 2.3 MP Olympus served us well. We are ready to upgrade to a 5.0MP now, 3 yrs. later. We have saved big$$ on not buying film since we purchased ours, which you can sink into the camera.
Consider size too. Do you want a compact camera like the Canon Elph, or is a larger one better for you. The smaller ones are great, but the controls can be hard to work, as they are so small.
The best way to buy a camera is to go into a camera store and try them out. Use a store with a liberal return policy & try a few out. You can make a better decision that way.
The digital auto red eye does work pretty well, but you can still get it. For some reason red in digital always comes out brighter. I adjust the colors and red eye with software on the computer. Digital is not the best for action shots as well. I do use my 35MM, with a 400 or better speed film for sporting events, etc.. as it captures motion better. Perhaps the higher MP cameras will solve this problem. That's the only drawback to digital vs. 35MM I can see. Portraits, objects come out crisp. I always shoot with highest resolution possible on my camera, so I get less pics per card. I can enlarge to an 8 X 10 with little graininess, which I like.
Hope this helps!