A vote in favor of S602 video
Don't be so quick to discount the 602's value for video. I have
a nice DV camcorder that is mostly gathering dust. I use the 602
to record video all the time and I haven't sprung for a microdrive
yet either, I record in QVGA mode on a couple 128MB Smartmedia cards and use my laptop to view the results (I reserve my CF card for stills). You might not be able to count every nosehair on your
subject but the quality is more than adequate to be able to enjoy.
The advantages of taking video like this are 1) Convenience of taking stills and video with one device is huge. Still quality is much
more important to me than video so I would never compromise still
quality by using a camcorder for both. 2) Having your output ready
for viewing or editing in AVI is a big advantage. You can convert
video from your camcorder into some computer friendly format but
it's much more of a hassle. I also happen to find using the computer is a great way to watch and share video. Grandparents are actually excited that they finally found something useful to do with their computer when you burn a cd for them. I even keep copies of S602 video I shot on my PDA (an older Sony Clie). 3) Being constrained to shorter clips is actually an advantage, you will shoot more economically and therefore be more inclined to want to see the results.
Finally, ask the camcorder adherents how often they really trot
out their camcorder and plug all the cables into the tv to view
previously shot video. I have hours of camcorder video and the
only time I ever look at it is generally right after I took it.
Maybe when prices of dvd burners drop <$100 I'll convert all my
video to dvd and then be more likely to watch it but at least for
now S602 is the video tool that I really use.
I don't want to totally knock camcorders, I still use mine occasionally. If you can afford both then go for it. But if you're choosing between a still camera and a camcorder, then this is a very worthy compromise.