I don’t know anything about the Nikon Coolpix, but I have the Canon A620 that Staplermofo mentioned, and it’s a wonderful camera. 7MP (though there’s a 5MP little brother, the A610), and very nifty swivel LCD screen. Has all the manual controls you could want, but in a size that’s small enough to fit in a coat or purse (or a big pocket). I think it’s down to around US $300, and I think the A610 is down to US $250. If you want to do enlargements or want to be able to crop and still print an enlargement, get the A620 with 7MP. I haven’t printed huge prints, but I’ve printed 8×10’s and they were gorgeous. I don’t think you’d ever know they were digital and not film.
If you’re looking for a DSLR, the Nikon D50 someone else mentioned is an excellent camera, and the price just keeps coming down on it. Pentax also has a lower end DSLR that got pretty good reviews, and you can use any Pentax lens ever made to boot.
There are a number of good online photo processors. I’ve used PhotoWorks and generally like them, though their color is sometimes inconsistent in their larger prints. But their prices for 3×5 and 4×6 prints are excellent (15-19 cents, depending on how many you print, and even cheaper the more you print), so they’re great for snapshots. Mpix is another online site that does a lot of professional and advanced amature prints. I have a friend who uses them and swears by them. She told me if I use them to be sure to mark the box on the order that says do NOT color correct. Some labs do an automatic color correction that will completely mess with the colors you have on your photos. I don’t know what either of these outfits charges for shipping to Canada, but I think I’ve seen mention of similar labs in Canada…do some searching online and hopefully you’ll turn them up.
Good luck finding the right camera for you. I have tax return euphoria myself–I’m drooling over a DSLR, but I just got the A620 for Christmas!