I have a few years old Canon HF10, which was a high-end consumer camera at the time. I bought with it a wide angle lense which is useful in constrained spaces and an external microphone which improves the audio considerably.
The image quality is very good and sharp when you hold the camera still but becomes blurry when panning. I hope this has gotten better with today's cameras. If it has, it might be a reason to upgrade.
I'm also considering a go-pro as a second camera.
Get the best you can justify to yourself. The shots will look better in 20-years time.
Recently bought a Go Pro Hero 2, it's 1080P HD and so far the results are mega.
Waterproof to 60m and it really is a small as it looks. There's loads of different mounts available and they've just released a wifi add on for it which means you can control it with your smart phone...means you can put it in some very "creative" positions.
Be careful with GoPros. The image is enormously distorted, horizons very curved, verticals leaning and bent.
Yes they are great for capturing activities close-in and wet, but not really as a general purpose camera.
HD video capture is available on so many cameras these days.
DSLRs are not really suitable for Point and Shoot.
The thing you want is waterproofing.
Panasonic have the ex-Sanyo range of waterproof camcorders and most "Tough" digital compacts do pretty good HD video.
I use a Panasonic FT3. (Waterproof, shockproof - compact, not camcorder))
I also have a GoPro 2 HD and I have only used that once, but for such a tiny camera the quality is amazing if you don't mind the distortion, but I do think that effect is the attraction for some users.
2 x GoPro Hero 2
1 x Pentax WG-ii
1 x Sanyo Xacti
1 x Nikon 300s
With the GoPros I have the wireless remote and a few other bits.
As Lakesailor says, the GoPro will distort, but for remote and getting into interesting positions it is the DBs. The Pentax is a great bit of kit with both high quality still and HD video. Plus waterproof to more than I need.
The Sanyo is sort of OK, but stills are poor.
The Nikon? A breed apart, but does not like the water much.