Pentax Optio WPi 6Mp Dead Need Replacement

My Pentax Optio WPi 6Mp finally bit the dust yesterday. I am unsure how or why but when it powers up the LCD screen will not come on and then a few seconds later it beeps and automatically powers down.

Anyway so I though hey let's just step in to the latest and greatest model, the W80, and call it good. everything I read about the W80 tells me that the picture quality is horrible.

Although I liked the waterproof function of the WPi the thing I liked the most was it manual focus capability. I don't have much else to compare it to but I though it was amazing. Through work I find myself having to take close up pictures of small parts or features and the WPi found itself irreplaceable.

One thing I would also like to play around with is HDR photography so I am looking for a camera that can bracket. Then again I have to ask are point-and-shoots an good for HDR photography anyway or would I really need to consider an SLR for that?

Main requirements - auto focus, bracketing for HDR.
Conveniences - I do like the water proof aspect but can live without it. I prefer nothing much larger than the WPi.
Dislikes - Extending lenses.

Anyone have recommendations? And of course if anyone can help squash the bad reviews on the W80...