A GF1 (discontinued?) is a nice piece of kit. Sure it's interchangeable lens but the 20mm/1.7 which gives 40mm eqiv fov is amazing optically and is really tiny. I got it to play with but dad loved it very much.
The flash is actually sufficient and pops up quite high. Auto mode is excellent for parental usage, and functionally its just a slightly enlarged p&s, but feels extremely solid in the hand.
You get all the typical compact camera stuff like face autofocus and all that jazz but the lens is super fast and iq pretty good so its probably "easier" to use because you'd get more keepers.
The current GF2 is even more suited for this purpose being simpler and a bit smaller but I have not tried one let alone let dad play with. If the GF2 feels as solid in hand as it's bigger brother than it would be an awesome gift item if but only for the quality build feel in hand.
Of course now there's a GF3 coming out which is more consumer oriented and super compact as it's the exact same size as a p&s so maybe that's what will hit the spot for your case. Definitely worth investigating the GF 1/2/3 and they all work with nice pancake prime or zooms and of course have the nice sensors.
All three do 720p AVCHD.