If you are new to digital cameras it is easy to get caught up in the megapixel wars. While I think this is a valid consideration there are major differences in the way digital cameras work and the way a film camera works.
One thing that annoys me the most is cycle time. If you have not used a digital camera a bit you may not realize that it can take some cameras a LONG time between shots. Most of the time this is OK but at the time you take one picture and then try to take another and nothing happen and then the shutter go off a few seconds later with the camera pointed at the ground you start to notice it.
I don't even think this would be the most important factor for you as I don't know how you take pictures. I almost think it is a good idea to purchase an inexpensive digital camera and find out what you like and don't like about it to help making the big camera purchase. Maybe borrow a camera and shoot with it for a day or two to get a feel of the likes or dislikes. At the very least purchase from a place that has a generous return policy and use the camera a lot when you first get it.
Something else to consider is, what are you going to use it for? If most of your shots will be aerial photography, digital is probably not gonna cut it unless you go with one of those huge megapixel cameras (8-12 megapixels), which blows your budget unless you'll mostly be printing 5x7 or smaller.
But on the other hand, if most of your photos will be portrait or close-up work, or most of your photos are for web usage then you can get away with lower megapixels and get great quality.
Also, let me make another suggestion. If you're going to buy a camera on the web, take a look at photo.net. There are camera house ratings put on the site mostly by customers, especially dissatisfied customers (watch out for the shops that promise the moon and then ship you moondust!). The ratings are kind of like eBay's feedback - sort of - so it keeps you on the look out for firms who pull bait and switch or quote you a price and then after you give them your credit card tell you the battery is an extra $50, and other similar scams.
As it appears you are in the UK I will recommend Jessops to you. They do a 30 day money back gaurantee and so if you don't like what you got it isn't a problem. When it comes to cameras of that price I'd recommend a Fuji. I have the S602Zoom, but I am not sure if it is still available. If I could post links to review pages and another camera page then I would, but I can't so sorry
I've got the Canon Powershot A70, its 3.2 mp and it shoots at max resolution of like 2000x something pixels and prints clearly on 8x11.5". The camera itself is GREAT, if your going for non SLR digital cameras make sure they've got manual settings like shutter, macro, etc. Also video is a nice addition and my camera records at 640x480.
Other stuff to look at is battery life (make sure u get rechargable batteries), what kinda storage it uses, and what kinda lens it has (that is a major factor in quality as well as MP).
I'd recommend my camera but recently the Powershot A80 came out, so definatly check that one out, i recommended it to a friend recently and he loves it. It has like 4.0MP i think and will fit your budget