Still Samples from Sony DCR-PC100 DV camera
As the line between Digital Still Cameras and Digital Video Cameras gently converges Sony release the first DV camera (DCR-PC100) offering acceptable (just) still image capture quality onto their proprietary Memory Stick. The Japanese Magazine Mobile Central post a short article on the PC100 along with the first still capture samples to be found on the net.
I personally wouldn't recommend these hybrid cameras to anyone serious about image quality (well, yet at least) and at just 1 megapixel (1152 x 864) even the PC100 is still way behind even medium range digicams, but the convergence is worth noting (especially as you're seeing more Digital Still Cameras with MPEG capabilities...)
The biggest challenges are getting the best of both worlds: High resolution CCD's, fast enough processing to get streaming images onto the storage medium (not currently an option with CompactFlash) and a good enough lens to save images from that "video capture" look.