The Canon S70 has been superseded by the S80, but it's still available. A quick search on shopping.yahoo.com yielded 27 stores, with prices ranging from $355 to $543 USD.
The DSC-V3 is 15 oz with battery & media, according to Sony.
The Olympus 7070WZ is 17 oz, according to Olympus.
The Canon S70 is 10.6 oz, just within her 12 oz limit. With a 28 - 100mm (equivalent) lens, stitch-assist, and RAW support it fits all of her requirements and desires.
I've shot panoramas hand-held with the S70 and stitch assist, and while that's not ideal it works quite well as long as you don't have close objects in the frames. I don't know exactly how close is too close, but trees at about 50 feet are no problem for AutoStitch to get sharp.
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I have an S70 which I bought to have a pocket-sized point-and-shoot camera, and it gives much better results than I ever expected. When I got it, I looked in the manual just enough to make the basic settings the way I want them, so I was never aware that it could shoot panoramas. Your comments got me to look in the manual again, and sure enough: there is "stitch assist".
Thank you! Now i can experiment with panos without having to read the entire 177-page manual.
I do recommend the S70 as a light-weight camera that can provide nice results. In comparison with my main camera (10D), it is pretty noisy at higher ISO speeds, but that is fixable with Noise Ninja or the like.
-Eric