I am actually amazed at the versatility and capability of these small P&S cameras. I used various Elan series cameras over the years and due to vision problems just sort of got away from it. The S1 IS was my entry into the digital world and as mentioned it went gunny bag and Canon replaced it with the S3 which is considerably more camera.
I believe the S2/S3 (and others) are well worth putting the few bucks into to better utilize it's abilities. The most useful accessories are of couse the adaptor tube and a protective lens of choice. The next lens should be a circular polarizer (take the time to learn how to make it work for you) then possibly some ND filters for those water and sunshine shots.
These costs can very easily be justified when giving the camera and the bag of goodies to a wide eyed grandson or daughter after you get your nice big DSLR.
My next camera will probably be a S4/S5 depending on how they go. The D80 Nikon looks really nice among many of the other popular DSLRs.
Too many gadgets = too many missed shots.
wickiup