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There are a lot of choices for $1k
I have been having great luck with the Canon G11 and Ikelite Housing. Will be posting pictures from my latest trip soon.
I am selling my Olympus 8080 with housing and Flash for under that and there are a bunch of deals like that out there.
I don't have much experience with dedicated underwater Cams, I go for the best camera and then get a housing for it.
I only shoot Raw so make sure whatever you get has that option.
Hope that answers some of your questions
There are several small cameras that do an excellent job with the right housing and strobe.
The G11 is nice... the Canon S90 if size is important.
The new Panasonic (not sure of the number, but it is the only one with gps tagging) does very nice HD video and while not having raw, takes fairly nice pictures, and has a 25 mm lens.
You need a camera, a housing and a strobe... which is very possible with any of the above.
If you want to do it in stages, the new Oly micro four - thirds has a housing for it the sort of bridges the gap between P&S and DSLR in price... small like a P&S, interchangable lens like a DSLR. But it would cost more
I suspect, given the success of the Micro 4/3 design... and low cost underwater housingsthat are now showing up(compared to DSLR's)... that within 2 years, the cost of underwater DSLR's will be about 1/3 what it is today....with some availble now and more showing up month by money. The Panasonic 4/3 now has two case makers (the inon appears particularly nice).
When the bigger still sensor Sony (apc c size, with 14 meg) is released, I expect Nikon and Canon will not be far behind and UW cases with them.
The Panasonic with the GPS is the ZS7/TZ10, which should be available shortly (can pre-order now). The earlier one is the ZS3/TZ7. The ZS3 has a Panasonic underwater case for about $270 available, and the ZS7 probably will, but I'm not sure that wide angle wet lenses can be added to these two. The photos will be about the same for the ZS7 and ZS3, but the newer one adds some manual exposure controls, along with the GPS. The LX3 is a better camera, but the cheapest housing seems to be the 10Bar one, at just under $700.
If you weren't going to do wide angle, and don't care about a little larger size for surface use, I'd say get the G11, since it has a pretty good innate macro capability, and a couple of reasonably priced housings are available (Canon, Ikelite). I'm probably going to end up with the S90, since the G11 is a bit large/heavy for a pants pocket -- my old S50 is about my limit for that, and the G11 is larger and heavier.