I'll back up JJJ's vote for the S3IS/S5IS. The zoom is an optical zoom which is rare for compact digicams, also, being able to control shutter/ISO speed/aperture in creative modes is very useful when trying to capture certain moments.
On the other end of the scale, If you were leaning towards a DSLR, a 450D with 2 lenses shouldnt be more than $1500.. Would give better images than any compact and be much more versatile, having the twin lens kit gives you focal length coverage from 18mm-55mm then from (iirc) 90mm-300mm
It all depends on what you really want out of it. If it were my decision, I'd go with the DSLR, but the simplicity of point and shoot cameras can be very useful after a few beers when aperture and iso all become just that little bit too hard.
