Compact vs DSLR

There have been a lot of good answers. But let me give you some practical considerations.

Your subject of interests are macros and birds. Photographing bird will need a very long tele. If you want quality, then no doubt D-SLR is the way to go. But D-SLR may cost quite a bit. The compact camera may give you more with much less money and bulk.

Let's start with an 20x zoom compact, for the Olympic model, it says it covers 26-520mm and you can have it for less than $400. So this is a big advantage, no D-SLR can give you this range with one lens. You need more than 2 lenses to cover this range for a D-SLR, which means you need to spend a lot more money and carry more weight on your shoulder.

So what will you need for a D-SLR to get something close to the 20x zoom compact? The minimum you need will be a camera body plus a couple of basic kit lenses, like the 18-55mm and the 70-300mm. So a Canon rebel XSi with 18-55mm ($660) plus a Sigma 70-300mm macro lens ($129) will be about $800, for example. Although the kit lens quality are considered subpar by many D-SLR enthusiasts, they are still way better than the 20x zoom. On the other hand, the 300mm covers up to only 480mm equivalent (on the Rebel's 1.6x sensor), so this combo is still falling short of the 20x zoom compact camera in terms of the covered range. Well, how much tele do you need for bird shots? I'm not a bird photographer, but you will need at least 600mm or more for a good serious shot from a distance in the wild. So the 20x compact camera will barely make it. To get a D-SLR lens to cover beyond 300mm, it is going to cost you a lot of money. The Canon 400mm lens costs >$1000. But if you want some serious bird photography lens, you may go for an insanely expensive and back-breaking tele lens, eg. the Canon 600mm $7000 or 800mm >$10,000. But wait, one may argue that for DSLR shots with a better quality camera and lens, you can crop the photo to enlarge, which is basically doing digital zoom on Photoshop. This will no doubt lower the quality of the photo, may not be that much better than the compact zoom camera.

There are a lot of technical advantage for D-SLR, as summarized by the many comments above. But you have to pay a lot more for each small step-up of the D-SLR system. For example, the Canon 18-55mm f/3.5-5.6 IS lens is less than $200, but my Canon 17-55mm f/2.8 IS lens is over $1000. To get f/2.8 over f/3.5-5.6, I have to pay 5 times more. It may not make sense to some, but to me it is well worth it.

So it really comes down to what is your budget and how serious you will get in photography. My suggestion is get what you can easily afford right now and start building up your skills and interests. If one day you really outgrow the 20x zoom compact, then get the D-SLR system. If money is no object (which is now rare in this economy), then D-SLR no doubt can give you much better quality. But remember, for the compact camera, go by the optical zoom, do not count the digital zoom. Only use digital zoom if you get really desperate, which is basically cropping.