If you are not in the market for a DSLR proper, and just want a smaller camera, I would recommend the Canon "G" series - the latest is the Canon G12 (aside from my DSLRs, I also own a Canon G11).
The fixed lens provides a lot of zoom, but it also has a Telephoto attachment that you can buy as well as a Macro attachment add-on. And a 2x doubler also, if I remember correctly.
The nice thing about the Canon G series is the ability to do full manual control, exposure bracketing, etc., and it is reasonably fast enough and has an ample capture/pre-processing buffer to allow to shoot the 'next' image very shortly after taking the first one. It is compact enough to throw into a small bag and take it with you, even with an extra battery.
I am an engineer myself, but I have been involved in my family's photography business since the early 1980s, and a lot of the professionals that I have talked to recently, like the G series for quick and simple (good quality) shots with a good amount of manual control, if they should choose. It does a good job even in full Program mode.
The cost for my G11 was USD$499 when I bought it - when it first came out, but it has gone down quite a lot. The G12 is in about the USD$400 range now, check B&H Photo and KEH
I hope that this helps.