You've got a lot of questions, but let me give you some advice. Until recently I was in the market. I settled on the Canon Powershot Pro1.
First of all, don't get hung up on the megapixel spec. Case in point - some very respected cameras - Canon Digital Rebel (300D), EOS 10D and Nikon D70 - have 6MP ratings. In all practicality, you don't really need more than 5-6MP with today's technology.
A little technical review - a higher MP
rating will not always produce "better" pictures. The CCD sensor in your camera is a square microchip with sensor dots - the number of dots on the CCD the resolution in pixels. A 2MP CCD has 2 millions sensors on the CCD. The maximum possible size of the picture (1600x1200) is constrained by the size of the CCD.
Now, the reason that a higher MP
rating will not get you better pictures is because of the size and compactness of the lens found on most point-and-shoot (non-SLR) cameras. The crux of the problem - the size of the CCD is limited by the size of the image that the lens can project on it. What this means in practice is that you can get more noise at higher ISO levels with a higher MP
This point is illustrated by comparing the results achieved with a digital SLR camera, like the Digital Rebel. Even though it is rated at 6MP, which upon subjective examination is not very "high", it gets much better results because of the increased size of the lens (and CCD).
Now some practical advice. The camera that I settled on was the Canon Powershot Pro1. I have to interject that I was buying used. Before the Canon, I purchased a Minolta Dimage A1. I took the best advice, which was to shop around and buy the camera that felt right, not necessarily the one with the best spec. The A1 was a 7x zoom (200mm equivalent) and 5MP. It felt good in my hand and had superior auto-focus performance when compared with the Nikon Coolpix 5700. I was extremely pleased with the camera, but I had to return it due to a failure of the image stabilizing circuit.
I took the A1 back and was able to "upgrade" to the Canon Powershot Pro1 for a total price of $600 (this is a $1000 camera new). It was a few months old and on consignment, plus for that price I got two extra batteries and a 256MB card.
The Canon (current top-of-the-line point and shoot) is an 8MP camera with 7X
zoom (200mm eq.), and has adjustable ISO level, and anything above ISO50 produces noise on lower light situations. However, in good light I am very pleased with the results, and the overall quality is much better than the Minolta. The lens on the Pro1 is Canon's "L" series, which is their best.
In closing, my advice is to explore the market and find what you like. If you can swing one of the ~$1100US Canon Digital Rebel packages, you might be happier in the long run. Those cameras take such good pictures without much effort. I really thought I had settled on the Coolpix 5700 until I realized how slow the AF
was and the fact that it just felt bad in your hand. By contrast, the Pro1 feels, well, like a professional camera.