I am quite tired of reading generalization that digital zoom is not good. Some people may detest it but I find it highly usable especially when I need an extra reach or I need to observe and capture behaviors/unusual angles. About 70% of my bird shots were in digital zoom. I would always opt for the optical zoom if it meets the framings I need. As I have mentioned before, getting a bit closer gives me a sort of intimacy to my subjects. It is part of my foreplay for lots of fun picture taking. Samples below taken yesterday were all in digital zoom (of course I had lots of usable shots in optical zoom as well - last image taken in optical zoom).
cheers,
gil
p.s. If one can't be sure on the absoluteness of his/her info, please just say IMO or say from references/researches.

1st/2nd/3rd images in digital zoom.
http://art4less.smugmug.com/photos/14717859-M.jpg

http://art4less.smugmug.com/photos/14717881-M.jpg

http://art4less.smugmug.com/photos/14717882-M.jpg

Now in optical zoom.
http://art4less.smugmug.com/photos/14717861-M.jpg

Settings mostly in this range
Date Taken: 2005-01-22 16:39:56
Date Digitized: 2005-01-22 16:39:56
Date Modified: 2005-01-22 23:32:36
Make: Panasonic
Model: DMC-FZ20
Size: 800x600
Bytes: 537523
Aperture: f/5.6
ISO: 80
Focal Length: 41mm (246mm 35mm)
Exposure Time: 0.0012s (10/8000)
JPEG Quality: fine
Flash: Flash did not fire, compulsory flash mode
Exposure Program: Manual
Exposure Bias: 0
ExposureMode: 1
LightSource: 9
White Balance: manual
DigitalZoomRatio: 0/10
SensingMethod: One-chip color sensor
ColorSpace: sRGB


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I am learning everyday; thus, I am a newbie at heart :~).