I don't know anything about the particular camera, but gut instinct tells me that a 5MP camera that is that inexpensive will not take the greatest pictures. I'd be inclined to look for a lower resolution but higher quality camera (and probably more expensive).
It would really surprise me if the quality of this camera would make me "trade up" from my 2MP carry-around camera. When you put more and more pixels on a small sensor, you are asking for more noise.
However, to put this in perspective, I'm waiting to see what the new Canon 20D looks like (next month?). This is a $1500 DSLR so it's not quite the same class.
As far as batteries go, I like the lower-end Canons that use 4 AA batteries. It makes for a heavier camera but 2000+mAh NiMH batteries are relatively cheap and you can always use alkaline in a pinch.