Hi,
You can pick up a fuji P & S with dedicated housing for around the £260 mark. These do take decent underwater photos although in common with all photography underwater the best results are obtained from very close to your subjects. TBH the housing costs more than the P & S at that level so you wont go much cheaper.
Underwater I use this housing
http://www.amazon.co.uk/Fuji-WP-FXF...3?ie=UTF8&s=electronics&qid=1239776051&sr=1-3
Its also worth spending another £120 or so to add a very basic off camera stobe to an underwater set up as this makes the world of difference at any depth.
Theres a number of key differences to the way light behaves underwater that need to be understood to get the best out of your underwater photography.
Most importantly water has a filtering affect on light. Its the rough equivelent of a light blue filter that removes 1 EV of red light for every 2.5 meters light travels. This has some really key affects for us. Firstly we need to be able to add white light to a scene so taking a dedicated flash or strobe makes the world of difference. Even with this the best results are still obtained by being close to your subject. The other area this impacts is white balance. Auto white balance can't cope so being able to shoot in raw and adjust it afterwards or set it manually in camera is essential.
At depths of 5m or less the filtering affect of water is less of an issue but you will come across issues on a sunny day of shadows caused by water movement. These will cause you more problems then shadows on the surface on a bright day. It also possible to reflect a flash back from the surface - light will reflect from a water surface if it strikes it at 45 degrees or less.
Another consideration with flash underwater is backscatter - water always has a degree of suspended matter in it. Your brain often process this out but it will reflect a flash back at camera - so you need to mount as far away as possible to avoid this.
Most divers trigger their flash as an optical slave but use a fibre optic cable from the onboard flash to the photo cell on the strobe to make this reliable.
I think this covers the main points, but manual white balance and an off camera strobe or flash are key.
Cheers
Hugh