For the most part:
Digital Cameras work good as digital cameras but BADLY as digital camcorders; and
Digital camcorders work good at digital camcorders but BADLY as digital cameras.
If you want decent quality - you need one of each - someday good hybrids may exist but we aren't there yet.
Most digital cameras have a movie mode which captures either MPEG or Quicktime (MOV) format files. They capture to compact flash so burn space rapidly. Capture quality is generally poor and audio is very poor and mono. On digital camcorders - resolution and quality of stills is generally poor. The general problem is that the electronics are designed for either really good stills or really good motion - a CCD that can do both well doesn't yet exist.
I'd be suprised if anyone disagrees with me (if there is a good hybrid out there - please let ME know where it is).
If you primarily want stills - with occasional "short" video clips and aren't concerned about quality in video - you may be able to get away with just a camera.