I have a Canon SD960IS with a Ikelite compact housing, a 67mm lense adapter and a Inon UWL-100 (also a UWL-100 w/ dome adapter). I use it for 720p-30fps video. It records h.264 at 15-30 mbps, it does not look overly compressed to me at all. I'm very happy with the setup.
The slightly newer SD980IS has 2 disadvantages: 1) the SD980IS is 24mm equiv, the SD960IS is 28mm equiv; and is just on the absolute border of vignetting with the UWL-100; so I'm sure 980IS would have to zoom. 2) SD980IS artificially limits video to 10 minutes, the SD960IS does not.
The battery life is good, I got over 30 minutes of video (not continuous) on one battery - keep in mind some P&S may not do so well as the video really is a secondary feature. The audio is mono only but that doesn't really matter underwater. For some reason the UWL-100 does not vignette, but the UWL-100 w/ Dome adapter does. They are 2 different UWL-100s' so I'm not sure if it's the Dome unit causing it, or the second UWL-100. Regardless, the first one I got doesn't. I have a 35w HID (just ordered a 50!) and I keep a reflector on an arm so I can slip the lighthead out of my goodman handle and into the reflector; makes a great compact lightweight setup thats good for travel and IMO has pretty nice looking video.
Here's a sample: http://vimeo.com/5005239?pg=transcoded_embed&sec=5005239
If I were you I would consider getting HIDs instead of LEDs but thats my preference. There is a guy on eBay selling kits of 2 new 24w brightstar HIDs with built in lithium ion batteries and you can ask for video reflectors; the reflectors aren't the greatest but they also come with diffuses, for $299 shipped. Each one is 1500 lumens, thats 3000 lumens for $300, what a steal. They include Y-S adapters. I bought a pair to play with; haven't had them underwater yet. They are very heavy, I ordered some new ULCS arms hopefully they will hold them tigher than the Stix or Ikelite arms that I have. Spent as much on the stupid buoyancy arms & clamps as I did on the HIDs 
1080p would be nice but for disk space and speed of editing reasons I'll stick with 720p for a while. I'm not sure if it refocuses in video mode, I've done a number of videos with it and it hasn't been an issue. But as you can tell by my budget setup and cheesy videos I'm far, far from a pro 
Rob