Initial Impression:

I just received this item and am happy to report that it works flawlessly. I made a few test recordings of my wife and dogs to a Class 6 8GB SDHC card (over 3 hours recording time), transferred to my computer, and compiled a video in windows movie maker with transitions, audio mixing, and credits in a matter of minutes. It seemed as though the video was not quite as crisp as true 720p HDTV, but the shots were made at night and indoors. Maybe better lighting or outdoor shots could be crisper, but what i got is still adequate and leaps and bounds better than any camcorder i owned in the past. I used a $20 tripod that i got specifically for this. Works just fine.

Pros:

+ Captures in AVI format. Most other SD camcorders at this price range capture in .MOV, which is essentially incompatible with windows. The AVI recordings can be transferred to your computer and used with the free windows movie maker (vista home premium) to make quality HD projects.

+Camera is very small and light. It's smaller than a Coke can. It looks very tiny on top of the tripod i got. Also allows you to get a cheap tripod because there's not much weight to be supported. Size and price also make the camera very portable. You're likely to take it with you where you'd be inclined to leave your more expensive or heavier camera at home.

+Quality glass lens: with a focal length of 34mm, it has much better optical quality than other cameras with essentially a pinhole and a plastic cover over it.

+Price: The camera is very cheap, peripherals are cheap too. I picked up a $20 tripod and a couple of batteries for a little over $2 each, and an equally cheap charger (bargaincell). Also, 8GB SDHC Class 6 cards can be had for about $20.

+No time limits: You can essentially keep recording as long as you want by swapping batteries and memory cards on the fly. Other cameras (like the sony) have a built in battery which make this impossible. The low price of batteries and memory cards for this camera make this a very affordable option.

Cons:

Sound is weak: Other reviewers noted this, and it's true. The sound is kind of bad, people need to speak up, and background noise is picked up. It's not terribly bad, but it certainly could be better. I'd consider this a non issue, since I plan on doing considerable audio mixing, narrating, subtitling, etc on post production. If there's dialog you plan to capture, you should use a separate high quality sound recorder anyhow and mix the audio track during editing phase.

Video Quality: It's not 1080p, but good 1080p cameras are typically thousands of dollars. I also have a hard time calling this 720p, since that's supposed to be 60fps. I'd call 1280x720@30 720i, but since the image is not interlaced, technically it's progressive scan, or "p" it could still be confusing for some people, though. Also, the video quality is not quite as crisp as true 720p HDTV content, but it comes pretty close. It looks like a home video, rather than an NFL production, but you have to remind yourself that in the end, it IS a home video. The quality is still better than standard DVDs, though, and MUCH better than old style tape based camcorders.

Final Thoughts:

The quality of your entire experience will depend on many factors. If you have a slow or low capacity memory card you may have slow frame rates, pixelation, blurriness, etc, since it may not be able to keep up with the required bitrate during recording. Also, recording is only the first step. You have to transfer the video to a computer to do the final editing. Just plug in the camera to the computer's USB port, and the memory card shows up as a removable drive. All you have to do is copy the video files from the camera to your chosen raw video repository folder on your local machine (happens in a matter of seconds). If you are running a windows based system, this camera makes editing very easy. If you have a mac this may not be the case, but who cares? There are a plethora of camcorders that record MOV. Get one of those instead.

Once on the computer, what hardware/software/OS you have will certainly play a role in the quality of your final product and how long it takes to render. On my X2 4400 Athlon with 2GB DDR, it took about a minute to render a 45 second project. In the future, I'll probably do the final rendering on my Phenom X4 9550 4GB DDR2 GTX 260 HTPC machine (my main [living room] entertainment PC). Either way, assembling and rendering a project with windows vista movie maker was very easy and very free. You're ready to go as soon as you get the video files on your hard drive. You don't need anything else. In fact, i didn't even bother to install the software that came with the camera.

In the end, if you have an up to date system and some basic computer knowledge, you can make some exceptional video products, and this camera plays very nice with the existing tools. There's absolutely no need to make any changes to the video format coming from the camera and loose time and quality along the way.

This is without a doubt the best camera available for the price, and in my opinion it's even better than many other cameras that are several hundreds of dollars more.