I am assuming that pygmy seahorse in the pic was not some giant mutant on a giant mutant fan and was actually about the size of your pinky tip, right?
This guy was about 1cm long.
I know the telephoto function is a digital effect - but at least on land it looks quite good.
I don't think it's actually a digital effect. Sometimes telephoto is just interpolation of pixels but (I may be wrong), from the info I've grabbed about that camcorde, it seems here it is about using less pixels than the 8Mp of the sensor but the number of used pixels is still enough to natively qualify the picture as HD rather than interpolated pixels.
They support wet mount lenses! So you can start off with the flat port (which is threaded), and add macro or WA lenses (or color filters) on that.
I also own the flat port with the M67 thread. The Inon UWL-100 type 2 does not fit the port and the type I has awful vignetting and distortion but I think this is mostly because of the size of the lens of the camcorder and far distance from the housing port. The smaller HF-200 may actually do the job better. I don't know about the other WA lenses (especially the new 10bar ones). The macro lenses from Inon seems to fit nicely without vignetting but I haven't had a chance to do some wet test with them. I had a dive with the flat port only on a wreck. It was not terribly interesting. Unless you want (like me) to do some macro work and unless the 10bar WA work, I don't find the flat port to be an interesting buy (although the port and necessary tool are less than 100 euros).
I need to add the last part of the review which will be more about field use in remote locations (in Raja Ampat) where the pygmy picture came from 
I've recently uploaded a video on vimeo from a raw mts file (auto WB, red filter, WP80, 5m depth):
http://www.vimeo.com/8873938