I
my Canon Rebel XTi, I've had it since August and just love the photos I'm getting with it. It is a dSLR so there is a bit of a learning curve, but even on Auto the photos are way better. I bought mine from B&H and they have come down in price quite a bit since I bought mine. I think Canon is getting ready to release their new model so that's probably why.
If you're not wanting to go the dSLR route, I've heard good things about the Kodak Easyshare M853 and the Canon Powershot Digital Elph series.