I got a cheap 4.1 MP camera and it's perfect, pictures are crisp, big, you can zoom in very big, but not to big, but that's not a problem. I wouldn't go for less. You can print your picture on A4 format easily without obviously seeing pixels. When doing bigger you will. The zoom is great to, it works in the viewwindow too. And it wasn't to expensive. I use an 512mb card, which stores on maximum quality 52 pictures, and on VGA quality about 999... I always uwe maximum quality because I never take 52 photo's... unless I'm travelling... then you would have a 1 gig card for sure... but you can buy them everywhere so...
I'm sure you won't get disappointed in every way. Digital camera's found their way and they are all very good. Digital mirrorreflex is the new way ahead now. So things are getting cheaper....
Greetz
EDIT: I you want a sample of what a 4.1 mp picture looks like you can PM me, i'll send you one