Do a google search for canon error 99. Happens every 5 mins to me in the snow, its a massive pita.
I've had an EOS 300D for about 6 years now and never heard of this. I use a Sigma 18-55 standard lens, and a Canon EF-S ultrasonic 75-300 mm telephoto.
To the OP, for ultimate picture quality nothing will beat a DSLR. Even a budget DSLR generally will have a very large sensor compared to even the best point and shoots, or even 4/3rds cameras (although I think the 4/3rds or whatever they're called seem like a nice middle ground). The large sensor and large optics allows much more detail, even on a lower MP camera. My DSLR is only 6.3 MP but will take significantly better photos than my 12 MP camera phone (which up until the Nokia 808 was probably the best camera phone on the market).
That said, there's something to be said for portability. My Nokia N8 is always in my pocket, and takes fantastic pictures (check some of my posts in the "post your best 5 pictures of this season" thread). I actually haven't used my DSLR once since I got this camera phone.
I will buy the new Nokia 808 pureview if/when it's available unlocked in Canada. It's got a 41 MP round sensor that's almost 1" in size, that will take full 38-39 MP shots in either 16:9 or 4:3 modes. To say it's the best camera phone is an understatement. It's got a larger sensor than most (all?) point and shoots, decent optics, etc. And it can shoot in 5/8 MP modes for e-mailable sized photos. Some people may slam Symbian but I've used them all and it's right up there, if not better in a lot of ways than the other OSes. That's a whole other argument though!
So yeah, if you're looking at some real photography, an entry level DSLR is a great option. For an all in one solution a great camera phone will work. Just remember that photography is probably 90% photographer and subject, 10% equipment. I'm a hack at best, but the basics of lighting, framing, etc. can go a long way from taking average pics to great pics.
Here's a pic I took this year at Lake Louise with the camera phone... Nokia N8
Here's one of my favorite pictures I ever took with the DSLR. It was in the first weekend I owned the camera and I think I just got lucky. I'm about 5' away from the plant, with the telephoto zoomed right in on it helping to make everything in the background unfocused. This is the small version I'm kicking myself that I can't find the full version anymore.