I bought a 10 MP Canon Powershot A800 camera at Frys a couple of years ago for $60 and I love it. It has image stabilization, 3.3X optical zoom lens, and it takes great pictures. It's what they call a "point and shoot" camera since it doesn't have all the fancy F stop settings and things the pros use. It takes better pictures than any camera I've ever had. I have a 12 MP GE camera that isn't nearly as good. I don't think you can go wrong with Canon.
The pictures my camera takes are about 5 MB in size, although you can set it for lower resolution if you just want something to email. I read that around 8 MP for a camera is equivalent to film, unless you plan to really blow pictures up to poster size, you don't need much higher than that. There're a lot of 16 MP cameras on the market these days, but you might save a few bucks and go with a little less.

Good luck.