My wife and I bought a brand new Canon Digital SLR (Digital Rebel in the US) in 2005. We've taken thousands of pictures and I can snap off shots of the kids in action without waiting for the lag that the compact point & shoot camera's have. It's not the world's best camera, but it works well enough for a crappy amature like me.
We just got a new Canon Digital Elf camera just to have a smaller camera around instead of lugging the SLR to events and such. This one too won't tell you the battery is low until it's pretty much dead. Otherwise, it's a nice little compact camera.
Guess what? While the Elf is a great camera, we leave it at home 95% of the time. We just hate the delay time, the SLR is so comfortable (familiar) and we're able to pound off shots one after another without delay. We've beat the living hell out of it too and it just keeps going and going and going. I've got some exceptionally well timed shots of my kids that probably could not have been captured with the Elf setup.
You've got the lenses from the 35mm Canon. That's a big plus. The lens switching ability on the SLR's is huge... Why not go Digital SLR too?
All of the shots below in my link are done with the Digital Rebel.
Good Luck,
Jay
90 964, 84 3.2