1. A regular digital camera will take video but not as good as a video camera. Your S3 IS is about as good as any camera for taking video. You can even use the zoom during filming, which you can’t with most cameras. You can buy a camcorder for less than a good digital still camera these days. Check out woot.com. They have one item every day, usually a closeout or something, and every so often it’s a camcorder. Usually they have IS (like your Canon) and about 100x zoom.

2. The real problem with the audio is that the mic is on the camera. So you can’t get good sound because it’s bouncing all over the room so everything sounds all echoey and indistinct. You have to get the mic up closer to the sound source to get good sound. What you really need for this kind of work is a camera with a mic. input, then a separate mic on a long cord. Some people these days use a separate device to record sound, like a minidisk recorder or a ‘field recorder’ that records to flash memory cards, then sync it up later in ‘post production’.
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