Ian,
Welcome to the world of Photography!
A digital camcorder which takes good still pictures is not very easy to find in the budget you specified, I did some research and found a couple of models that meet your criteria.
Panasonic PV-DV-702
Sony DCR-TRV-50
There are other models too but either they are beyond your budget or do not offer the two choices combined. Anyway I will continue to look for a more suitable model.
Meanwhile, you need to check these two models out and see if you like them.
Any digital camera offering a still picture resolution lower than 1024 x 768 is not to be considered as it will not provide the resonable image that you are looking for.
Sony TRV series of models offer Zeiss lenses too (some models) I would seriously consider them too.
I would also urge you to check out the thread about digital and optical zoom as it applies to digital video cameras as well (check the link below:
Digital vs Optical
Is it possible to check at your end what is available? If so, we can narrow down to a few models you like.