Get the digital camera. Then go to shutterfly.com and set up an account there. You can upload pictures to the site, adjust them just like you would on a picture editing program, put borders around them, etc. Then you can have them print them out. As many or as few of each that you want in any size you want from wallet size up to 16X20 (I think). The pictures are of very high quality and inexpensive. My wife just had 128 4X6 photos printed out for $38 and they were in our mailbox within 4 or 5 days. Hint: wait until they send you a special offer and then get a bunch printed at once, they will email you a new offer every few days.
Then go to photobucket.com and get your free picture hosting account to link or share with friends. You can link to them for displaying here on FR or allow them to view your whole album with an email. Heck, they even put the html coding in for you!
I just got an Olympus but I hear the Kodak cameras are great, too. Avoid the Gateway digital cameras. The basic differences in price are how much optical zoom (get at least 3X), how much "digital zoom" (this is nothing but higher resolution photos but more is better), how much memory (you will probably want at least 64 Mb), the amount of megapixels (look closely at your TV or monitor. See the little dots that make up the picture? Those are pixels. Get at least 3 Megapixels, perferrably 4 Mp) and the size of the viewing screen.
The Olympus I bought was $250 + $50 for a 64 Mb memory stick was a pretty good balance of the above. It goes through a pair of AA batteries about every 60 photos or so but they are cheap.
Invest in NiCad batteries and a recharger, much cheaper.