Originally Posted by foothead
Are you okay with buying used? If so, you can get this camera
and this lens
for $204 shipped or this camera
with this lens
for $174 shipped.
If you must have new, the best you'll be able to get is a crappy point-and-shoot, which generally won't be as good as either of these cameras. They're both older cameras which is why they're so cheap, but the photos will still be excellent. The two main things they won't have that newer cameras have are improved low light performance (both only go to ISO 1600, and neither performs well at that) and megapixel count, which is largely irrelevant for most people's uses. Even the 6.3 megapixels on the Canon will be way more than enough for posting them on the web (a 1080p screen is only 2MP to give you an idea) and small-medium prints (up to 8x10 will look good). Regarding the low-light performance, it looks like most new point-and-shoots in that price range also max around 1600, but these SLRs perform better at that sensitivity (though I'd still say to keep it under 800 pretty much all the time). They're also going to have much better optics than a p&s, and she will be able to get new lenses and keep them when she upgrades to a new body. Having used both lenses, I can say for certain that the Olympus one is optically superior, but Olympus has ceased production of their SLR cameras, save the pro-level E-5, but that was only made to satisfy pros who had already put massive amounts of money into Olympus SLR lenses. In the future, she would have to switch to Micro four thirds (google it) if she wanted to continue using her lenses, but doing so would require an adapter that runs about $150. Canon still makes cameras and lenses on the same system, so this won't be a problem if you go with that.
The other thing to take into account is size/weight. Neither of the SLRs I linked are particularly big, but they're nowhere near as small as a standard p&s. A p&s could easily be slipped into a purse, while she'd have to either wear the SLR on a strap or carry a fairly large bag. Personally I'd much rather carry the larger camera for better image quality, but you should definitely ask her about this.
IMO, go with the Olympus if you can find a way to spend that much. I'm still using a very similar camera (E410) with the exact same lens for my digital work, and it's performed admirably and doesn't feel outdated at all. The Canon likely will feel dated and will probably be missing some features the Olympus has. Olympus's cameras also tend to feel much more well-constructed than Canon's consumer line.
You'll also have to get a CF card for either camera, but these are cheap. The Olympus can also take an xD, but I recommend against that, since CF is superior and generally costs less.