First of all ignore ANY figures for "digital zoom". This is no different to resizing in photoshop and is *UTTERLY* pointless.
2 MP is easily enough to get a very good 5" x 7" print from, in fact it's just enough to get a good 8"x10" print, providing you don't crop the image beforehand.
My choice would be the 3.2MP with 3x zoom, 10x zoom is more than you're likely to need, and virtually all photography (aside form landscapes I guess) is improved by getting closer to your subject. 10x will result in very boring pictures lacking perspective.
- seb