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So here's a question for you camera people. Is it possible to take decent pictures with a small point and shoot? My parents got me a cheap Nikon Coolpix for Christmas. It's tiny with a small 3x zoom but is 12 megapixels. So far my images aren't worth poop. My old 5mp Sony Cybershot seemed to capture better images. Granted, this camera was only $100, so I'm not expecting the world. But it would seem I'd be able to get decent shots of people indoors that were in focus.
Your really limited with the Point & Shoot cameras. Using a DSLR and hot shoe type flash with a bounce head you have way more control over the flash lighting. Even using a higher ISO setting indoors with the DSLR (less the flash) will give good results.
With the higher pixel count you need to be steady while taking to picture as the large resolution is going to show more imperfections. Even the built in IS on the inexpensive cameras isn't fail safe.