Before becoming a professional photographer, I went through many point & shoots. I was always looking for that perfect combination. (Plus, I REALLY wanted zoom!)
I agree with Jennifer, Canon Power Shot is fabulous for point & shoot. For DSLR, Nikon is my baby! (Canon DSLR has a problem with focus.)
Canon makes Power Shots with just about anything you need. Continuous shooting mode was my best friend with my active toddler.
Are you a Costco member? If not, go check it out. (No, I don't work there!) There is no other company out there with a return policy like theirs. Plus, the prices are hard to beat.
Above all, get out of Target! I love that store. However, it's NOT where you want to be buying electronics. Go to Best Buy if you want to really check out cameras. Even if you don't buy there, it's a great place to check them out.
I completely agree with you on it being small enough to fit in the pocket at this time. With toddlers, you don't want to be lugging around a DSLR. As much as I love mine, we wouldn't have half as many photos of our little guy if the camera wasn't kept in my purse. My photography priorities have changed since then, and it's now worth it for me to carry the camera on my back. (Like our trip to the zoo yesterday!)
Good luck!