Do a search on this and the "other boards" on digital cameras. Seems this very question pops up at least once every other month.
I've posted on this subject a bazillion times. I seem to re-hash the same old info time and time again. Oh well, one more time won't hurt anybody!
First off, check out
www.dpreview.com. Bookmark this site! Now! No matter what you buy, make sure you check the reviews off of this site. Do your homework and do some comparisons. This site RULES for that kind of information!
You mentioned that you want a 8x10 image. I'll go on the notion that you want to PRINT this large of an image (you don't mention print in your post).
Large images REQUIRE lots of information. For example, my 3 MegaPixel camera will take a 5x7photo at it's highest resolution. Oh sure, I can use programs such as Adobe Photoshop to get a 8x10 print, but the printed out photo won't look nearly as nice as one that came from a 4 MegaPixel Camera.
Images for the web require minimal information. A lowly 1 MegaPixel camera is fine for the web. It's the printing part that kills ya!
With that in mind, I'd recommend a 4 MegaPixel camera or higher. Unfortunately, now we're talking some serious coins.
Memory: Personally, I prefer a camera that doesn't have it's own propriatary memory technology (Sorny). Of the two (Smart Media and Compact Flash), Compact Flash tends to be cheaper, easier to find, and is more of an industry standard. I would chose a camera that took a Compact Flash Card. Since your camera will come with a small card, you'll want to go out and buy a 256MB card.
Spend the $20 and get a USB Compact Flash Card reader.
Batteries: You'll want good, rechargeable NiMh batteries and a charger. Buy 3 sets, as you'll go through them like water. Or, if you buy a Canon, they use their own high end video cam corder battery. Lasts all day and then some!
My overall recommendation for a 4 MP camera would be the Canon PowerShot S40. Or, if you're really into digital photography and want more manual features, get the Canon PowerShot G2.
I have a Nikon Coolpix 995 at work, and a Canon Powershot G1 (older 3 MP camera). Personally, the Nikon is a great camera for Macro stuff, but lacks in most other features and image quality. I'd go with a Canon.
Buy yourself a padded Pelican Case. 100% waterproof and with the foam padding, your camera won't get destroyed when you toss the case around. Unless you're going scuba diving, external waterproof housings are not a valid option.