The best deal with a quality camera/lens/housing I can find is the Olympus PM1 with its housing on sale for $500 at Optical Ocean Sales online. For best results, you will also need a long arm that fits to the cold shoe of the housing and an underwater strobe. This will give you great shots underwater. I tried it with my last scuba diving trip in Maui, had a lot of good shots (turtles, urchins, fish, lobsters, frog fish, sharks, etc). I use the Sea and Sea YS-D1 strobe but a cheaper YS-01 will be sufficient. If you snorkel, then the strobe is not required (but it will still give you better shots especially when you do some macro shots).
The LCD screen will look dim underwater, so you need to use the menu to set it to maximum brightness and set a longer display time to check your focusing and picture quality. I don't have problem with the LCD screen of this camera or my old PS Canon S90.
If you want good quality underwater photos, I really suggest you get a good quality camera and buy an underwater housing. The so called waterproof cameras are not good underwater. Also, color falls off quickly under the water. So if you do not use a strobe, then you need to do custom white balance or use a red filter for color correction. Using a red filter will reduce light by at least a f-stop. Underwater mode may be useful and is basically changing white balance. It is better to do custom white balance and/or shoot in RAW. Look for a camera that can do custom white balance.
My old Canon PS camera with its housing cost about the same as the sale price of the Olympus PM1, and the PM1 is an interchangeable lens camera system with better image quality. I actually bought this one right after I bought the newer Olympus PL5 system, because it is such a great deal and I can avoid switching lens port.
Buying underwater camera equipment is always a risk, because flooding can and will occur with many (even well made) underwater equipment.