A still camera is not going to make a good video camera. And a video camera is never really going to take good still photos. The fact my Olympus CAN take video is a plus, but truth be known if you want a video camera buy a video camera.
Here is a short video I did shoot with my Olympus 790SW.
http://www.youtube.com/watch?v=QV2HP_8Rkko
The Olympus does not take great pictures. I have an older Sony F-717 that blows the Olympus away. The Sony is a 5 mp camera - but the reality is that megapixles is just a marketing scam. The quality of the lens and the quality of the CCD chip is so much more important than the mp rating. I would rather have a 5 mp camera with a good CCD and excellent optics than a 20 mp point and shoot camera with a crappy CCD and crappy optics.
You can tell how good a camera will be by its lens. A small lens generally means lower quality photos. This is why the professional level digital cameras use real lenses.
But in spite of the limitations. I would get another Olympus Stylus. You just can't beat the waterproof feature. It is a rugged little camera. And it fits perfectly in your back pocket. Nothing sticks out of it - I hate those cameras that have the lens that pops out. More things to break!
The Canon may very well be a good waterproof camera - but really I still think Olympus has the edge. I really like the 160 foot waterproof housing option! For diving this is a must have item. For one - the flash is almost useless underwater. Particles in the water reflect the light and the photos just do not come out. The housing has a flash diffuser which helps a lot.
Anyhow this is just what I think. If you like the Canon better get it. I think that unless you plan to go diving and actually need the housing, both cameras will do what you want. Canon has a pretty good reputation for making decent stuff.