As to whether to spend the extra for the higher-up camera... keep in mind the camera I use for the paper is 6 megapixels and the shots are big enough to work fine in the newspaper. Both those cameras have more megapixels than that. The point is, if the only difference in those cameras is megapixels, the $50 would be better spent on getting a bigger memory card. If there's a feature on the more expensive camera that would be important to you that the cheaper one doesn't have, then get the more expensive one.
I've been using a Sony DSC-W1 for home use for a bit over two years now and it's been a good camera. that model is discontinued now (it's 5 megapixels) but there are similar models. Then again, when I bought mine, the 2.5-inch screen was rare and a special feature... and now most cameras have screens that size.
One thing I like with mine is that it uses rechargable AA batteries. If my batteries die, I can grab a pair of alkaline AAs at the corner store and they'll work in a pinch, then I can recharge the AAs at my own convenience. that's cheaper than buying a second proprietary battery so that I can always have one charged and ready to go.