What type of action are you looking at doing? Are you trying to keep it under a certain budget? Is image stabilization important? Do you have more than just the kit lens with your 35mm Rebel?
The E-420 can produce very good shots, and could be a very good choice for you. There are others out there such as the Nikon D40x and D60, Canon XTI and XSI, and The Sony Alpha series. The Olympus is a very compact DSLR that is easy to carry around.
Right now I have a Canon Elph, but the action photos just aren't that great. I chose it because I take a lot of photos at renaissance faires and I need to be discrete. My photos span from action to people to landscapes and vacation shots. I have an old Canon Rebel 35mm, which I really love, but obviously I need a digital camera.
I saw the Olympus e-420 and was attracted to it because of it's size and the fact that it is a DSLR that isn't too pricey. Do you think this is the way to go or is there another DSLR or point and shoot that would be better?

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