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The Pentax Optio's are the smallest series of cameras. I have the Pentax Optio S4i. It is a 4 megapixel camera and takes amazing macro shots (due to the pentax lens) IT can be picked up now for like 349 ish (thats canadian) Built very tough, and it has an umlimited video mode (meaning you can shoot video until it fills up your secure digital card)
If you would like there is a 5 megapixel edition as well called the Optio S5i.
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