Graham, how do you like the Microdrive? Any problems/issues with it? How's the power draw - does it suck your batteries down fast?
I found the camera I'm going to buy for her. Sony DSC-F828.
http://www.dpreview.com/articles/sonydscf828/
8MP, takes memory stick and compactflash. My Sony miniDV camera takes the same batteries, so we can share when we're on trips. Oh, and USB 2.0!! w00t.

Now I just have to wait for it to be released in November... Although, you know, it doesn't come with a memory card. $1200 for a camera, it should come with a stinkin' memory card... Maybe I'll just buy a Microdrive for her stocking.