Some ideas based on your specs:
Non-DSLR (ie. Point and Shoot; range in size from ultra-compact to moderately large)
Canon PowerShot G10
Canon PowerShot XS10 IS
Panasonic LX3
DSLR (range in size from moderately large to very large, especially in professional settings)
Canon Rebel XSi
Nikon D60
Olympus E-420
Panasonic Lumix DMC-G1
Pentax K20D
EDIT: It is tough for any of us to say whether or not a DSLR camera is the right choice for you. Many people say that once they "go DSLR" they could never go back. For others, DSLRs are simply too much camera. Whether you go for a 'lower end', small body DSLR or a 'higher end' compact camera for similar $$$, I think you will be happy with your choice. All the cameras listed above will provide good image quality with a full set of features.
DSLR's generally offer more features and upgradability, with flexibility (and extra cost) of interchangeable lenses, and are not always as large and hulking as you'd think.
P&S's offer portability, obviously, and depending on the photographer, may offer ample features as well.
There's no beating a DSLR for a $1000 budget, but it is amazing what they can pack into a P&S these days. If you have a chance, go to a good camera store and try 'demoing' a few different models out for yourself. Once you've done your research, it often boils down to comfort, feel, ergonomics and ease-of-use to break the tie.
Last edited by OBCT; 01-26-2009 at 06:27 PM.
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