If we had to make a wish list of features for a digital camcorder, then the Sanyo's latest would tick pretty much all the boxes.

The Sanyo Xacti VPC-HD1 is small, it has a long (10x) optical zoom and it can capture not only high-resolution 5.1-megapixel still photos, but also high-definition (HD) video.

It can even talk. Although, in practice, the voice feature isn’t as exciting as it initially sounds and will probably find itself switched off after less than ten minutes.

The Xacti’s distinctive pistol-trigger shape might be considered bulky if it was just a digital stills camera. It’s virtually microscopic, however, when you consider that it’s effectively a full-blown HD camcorder, too.

By HD we mean that the VPC-HD1 can film in the 720p high-definition video format. HD camcorders like this are still very rare.

Sony’s HDR-HC3E is probably the Xacti’s nearest rival, but is much bigger and far more expensive (around £1,000).

What helps to keep the Sanyo’s physical proportions down is the fact that it doesn’t use cassette tapes like other HD camcorders. Instead, the VPC-HD1 saves its MPEG4 video clips – along with its JPEG photos – on SD memory cards.

Another benefit of recording to memory is that it’s quicker and easier to drag and drop video to a computer (either using the USB cable provided or a memory card reader), compared to transferring DV tapes.

Unfortunately, Sanyo doesn’t include an SD card in the box and buying one will add to the initial cost – especially since, at top HD quality, you’ll only get 28 minutes of video onto a single 2Gb (£50) card.

Plenty of other accessories are included, however, such as docking station, lens cap, USB adaptor, microphone cable and remote control handset.

Also, Sanyo thoughtfully provides a durable carry pouch as well as both standard-definition AV leads and component video cables for connecting to an HD-ready television.

Despite its small size, but the Xacti is very comfortable to use. This is helped by a five-way joystick and an extremely sharp, bright 2.2in OLED display display.

In fact, Sanyo’s little pocket wonder might have been our favourite camera ever if it wasn’t for one tiny detail; picture quality isn’t that great. Still images are very detailed and colourful, but they sometimes demonstrate slightly too much sharpness around the edges of different colours.

In strong, even light, HD video quality is good, if a little heavy on the contrast. But use the video function in lower lighting conditions (indoors, say) and it really struggles, with graininess dramatically marring the image.

Auto focus, too, is slow, taking longer than average to catch up with moving subjects. And even with a built-in image stabiliser switched on, the picture can end up looking very shaky, especially with the zoom at full stretch.

It all makes for an unfortunate end to what could have been a truly fantastic digital video camera.

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