A quick vote for the Olympus mju-II.
A very compact 35mm camera with a sharp f2.8 35mm fixed focal length lens. Weatherproof, flash (including red-eye reduction) and even a spotmeter (if you can find it!) all for £74 (http://www.7dayshop.com).
I've had one for about five years (which proves it's tough) and I'd have another anytime.