Don't get caught up on the number of pixels. More than 3 MP only really matters if your sis is going to be blowing up the pics to 8x10 or zooming in on small areas using Photoshop. My wife has a 3 year old 3 MP Olympus that takes exceptional snap shots and has been perfectly reliable.
Don't worry about digital zoom - it is practically worthless.
Olympus, Samsung, Panasonic, Nikon, Canon, Pentax all make very fine point-and-shoot models in your price range. Most will have some type of image stablization - thought that's over hyped too.
How old is your sister? How "in to" photography is she? For memory snap shots almost any will do. Just steer clear of Sony - you have to buy their silly memory sticks - and stick to the major Japanese brands (most now made in China but who's counting?) and you should be fine.
My parents have the A530 from Canon and I can tell you straight that it takes INCREDIBLE pictures. I own an A600 from FujiFilm that seems to have quirks with focus at times, but captures tons of color and light.
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