My interpretation on the difference is
that a camcorder which takes stills will have electronics and an appropriate mechanism for storing video. That video would normally be viewed on a television using NTSC (or PAL), fill the screen and look pretty good. The best video capture is written to miniDV tape. A still can be taken and written to a memory card but the resolution will not be that great.
O the ither hand, a still camera will be able to do good stills written to a memory card - and if the memory card is big enough, record short video clips that can be displayed in a small window on a computer - but when expanded to fill a TV screen won't look good at all.
Also, I have not seen a still camera - with video clip capabilities - that has a decent mic - or a mic in jack.
"Digital video" on a still camera with limited video capabilities just means the video footage is stored using a series of 0s and 1s and makes no promises as to the quality of that video when viewed on various monitors or sizes. DV on a camcorder is a standard method to store video that, when played back on a TV, will provide good quality video.
If you want good quality video, use a a good video camera - miniDV tape or even some of the hard drive based units. Stay very far away from DVD based units. If you want good quality stills, use a good still-camera.
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