If you're top priority is a small, interchangeable lens digital SLR, then the E-410 should be the place to start. There are none smaller, and the telephoto 40-150 is exceptionally short. It's light weight, and has all the basic features most people want or need in a SLR. It's basic enough for beginners, and featured enough (and good enough image quality) to satisy most advanced amatuers.
However, before you buy, you must understand two things: smaller SLRs and the 4/3rd system.
The smaller SLRs from all brands (Canon XTi, Nikon D40/D40x) have trade-offs. They all use the rear LCD for everything. Combined with the smaller battery for the smaller body, battery performance is not as good as the next size up (E-510, D80, etc.). Additionally, the magnification inside the viewfinder is less, making manual focusing (or seeing fine detail) a bit more difficult.
The 4/3rd system is also new to most people. In an attempt to compete with the well established Big Boys, Olympus, Panasonic & Leica now offer a new lens mount, where lenses can be interchanged among brands. The only problem is that Olympus is the only real line from these three, while Leica is now offering two lenses total, and Panasonic...none. The only major independent manufacturer currently making 4/3rd lenses is Sigma, and they do not offer most of their line in this mount. However, for most beginners, the two lense offered in this kit will be all they need.
The other major difference with this system is that it is a different "format". Traditional 35mm cameras produced a 3:2 format (which we typically call 4x6 because most labs produce that size of prints). The typical print from a 4/3rd camera would be 4x5, a more typical size from the older studio medium format film cameras. Now this has it's trade-off. Since most people will go ahead and make smaller prints in 4x6 size, they'll have to cut off a bit of the bottom and/or top of the photo. On the other side, they'll cut off less on the typical enlargement sizes, such as 8x10. I would say usually, it's a good trade-off. On most horizontal shots, we usually leave plenty of room at the top or bottom, whereas people tend not to leave enough room on group shots to allow cropping from 4x6 to 8x10, OUCH! This also means that on identical megapixel cameras, the 3:2 will loose more megapixels when cropped to standard enlargement sizes than 4/3rd cameras. But you can make 16x24s instead of 16x20s, etc.
One thing that is more difficult for me is that because the image is a bit more square on 4/3rd cameras, they tend to put the information inside the viewfinder on the side versus underneath the image. Looking down, reading left to right is more natural for me.
Anyway, the product description by Amazon is very detailed, but let me add that the "Live View" feature isn't as handy as it seems. First and foremost, you loose autofocusing (because the autofocusing's mirror system must be moved out of the way). Can you have it in Live View and still AF right before the shot? Yes, but it will cause a lag time that will be unacceptable for action or quick candids. However, it could be a welcomed feature used properly. You could pre-focus on a bird's nest (that ain't going no where), and use the Live View while waiting for the best time to shoot.
Overall, I give this camera very good marks. If you like the idea of 4/3rd, but don't need a small camera, you might wait for the soon to be released E-510 that has a larger battery and an Anti-Shake feature. As far as the competition goes, you might look at the Nikon D40x, or Canon Rebel XTi.
Nikon D40x 10.2MP Digital SLR Camera with 18-55mm f/3.5-5.6G ED II AF-S DX Zoom-Nikkor Lens
Canon Digital Rebel XTi 10.1MP Digital SLR Camera with EF-S 18-55mm f/3.5-5.6 Lens (Black)
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