Short answer: lights are going to be more important than the camera.
Long answer: focal length affects depth of field. Specifically, the longer the focal length (the more you "zoom in"), the thinner the depth of field (the area that's in focus from front to back, near to far). The way to compensate for this (if, say, you want an entire 5' long snake in focus from head to tail) is to "stop down" (i.e. use a smaller aperture (higher f-number.) But this, in turn, affects exposure -- the smaller the aperture (the hole in the lens that the light goes through) the less light goes into the camera, and therefor, the darker the picture.* Thus, the importance of additional light.
The above is even more true for pictures of fish (in/under water) because water is more dense than air which means light penetrates even less. (Also note that the penetration difference in wavelengths (color) is more pronounced in/under/through water (which is why things tend to look blue; red light has the least penetration, blue the most).)
On your budget, I'd recommend going to your local hardware store and spending $100 or so on a few halogen workshop lights (and stands). Then pickup the best point-and-shoot you can afford with what's leftover. Maybe something like a Panasonic ZS100 which has a large-ish 1" sensor and 10X (25-250mm equivalent) zoom lens (and sells for around $700).
*for the sake of completeness, the two other ways to compensate for this are: a) increase ISO, but this results in more "noise"/grain and/or b) increase/lengthen/slow your shutter speed, but with living subjects (as opposed to inanimate objects) this will result in more motion blur. Which brings us back to: add light(s).