I got my toddler a "real" camera years ago... and am sooooo glad I did!
1) Cost about the same as a "kid" camera
(NikonCoolPix xmas sale)
2) Takes decent pictures / has decent megapixels
(so it doesn't end up never used in a toybox)
3) Is easy to use
4) Combo of 2+3 (prints decent pictures)
5) Is under warranty / can get repaired EASILY
6) Lasts forever.
We're on year 6 of that nikonCoolPix. $200 camera I got for about $50. And even though it's under warranty/etc., and has definitely been put to the test, it's still working flawlessly.
Kids, in my experience, know the difference between a "toy" that's meant to be beat up, and the real thing. They treat the TVs, DVD players, phones, etc. decently. Ditto real cameras. Toys, otoh, don't get treated decently. It's like sippy cups vs glasses. They throw sippy cups, knock them on the floor, etc. but are careful with real glasses.
So, for myself, I'm a fan of a real camera for little ones.
Just my .02