After all the research, we actually tried the digital cameras. The real test was how they'd work with 0.3 and 2.5 year olds!
Unfortunately, once you've had an SLR, the only way to go digital is to move to a D-SLR.
We ended up buying a Nikon F65 - which takes better
photographs than any of the (non SLR) digital cameras I tried - especially the fact that there is no delay between pressing the button and the shot being taken.

- thanks for the help and suggestions!