They say Sony and Canon are amongst the best of the small compact HD camcorders.
I have a Sony Sr-8 which is a 100gb HD camcorder.
Its pretty good. You have to set the camcorder picture quality setting to its highest setting (ie HD) in order for the picture to be of good quality. Bear in mind this results in very large file sizes, so I would advise go for minimum 60gb HDD.
Low light shooting quality is poor. Outdoor shooting quality is excellent. Sound is OK (all built in mics on small handheld camcorders are fairly shite).
The menu system is not that intuitive, but once you have worked it out it is pretty good. One thing about HD cameras is you can pick your clip by pressing the thumbnail on the screen which is much better than rewinding a cassette, pressing play etc....
I personally would go for the canon. My friend has the canon hv-10 (i think) and it is better.