The so-called "good photos" of yours... those are more or less still pictures, which shouldn't present too much of a challenge to any digital camera these days. As long as you stick to branded items (Canon, Nikon, Olympus, Kodak... you'll get the idea) that have been reviewed on the Net before, you should be fine. (There are a lot of other things to consider - lens quality, MP, interface and control etc, but when you're operating on a tight budget there's not much room for negotiation.)
Decreasing image resolution DO NOT affect the image quality. The resolution refers to the size of the picture taken in the camera: this affects 2 things: 1) The size of the picture on your memory card and 2) the size of the picture itself. No 2 affects print size of course. However, as a rule of thumb, try not to save on memory cards - very often there's only 1 chance to get your shots right. MPs on a camera refers to the maximum size you can take: on a 0.3MP the maximum you can take is about 640X480. The more the MPs, the bigger the picture (the higher the resolution) you can take.
The S1 IS, aforementioned, is actually worth considering. The IS part refers to Image Stabilisers, which more or less means the camera will compensate for your camera's movement if you accidentally (or clumsily I might add) moved your camera during shooting... many a shot of mine was ruined due to camera shake (gr...) if you are looking for a camera for casual (and domestic

) purpose perhaps that camera is a sound choice. It could be way too much for your budget... but remember that you're going to settle on something you're going to use for the next 4 years or so. It's nice to settle for the S2 because there's quite a lot of improvement done to it compared to the S1 IS, but you'll be all right even with the S1.
As for the rest, the others are trying to point out one thing: great pictures come not because of the equipment, they come from your knowledge, skill and how good are you at seizing oppurtunity. The former bought by money, the latter learned from people like those from here :hugs:
P.S - be very careful on which website you buy your product from. I've been in your shoes before

. If necessary, check with the folks here before you buy, we're always happy to help.
Alternatively, buy from BH Photo Video or Freestyle. They're great people to buy things from, and their prices are standardized. If you find aything cheaper than theirs, be extremely careful.