I personally think the Sony P200 is the best small camera right now. I don't have one, but if I were purchasing today it is what I would get.
It has a protective cover over the LCD so you can drop it in your pocket without as much worry about cracking it. I've done that once and consider it an important feature from a sadder but wiser point of view.
It is the only small camera that doesn't give red eye in most situations. The flash is offset from the lens more than most. Someone pointed out that that makes shadows in situations like taking someone's picture near a white wall. Most people prefer to not have the red eye.
It has no purple fringing and the distortions are very good for a pocket camera.
It has some manual exposure modes to grow into as well as some preset manual focus distances.
It has an excellent movie mode and fast shutter delay and cycle times.
It is a bargain in a 7Mp camera.
On the downside the flash isn't as strong as the SD500. The SD500 is exceptional in that regard for a tiny camera and the Sony isn't bad. I'm also not a fan of the Sony proprietary memory compared to SD, but if you are going to use it only for the camera, Memory Stick Pro isn't much pricier than a fast SD card.