I've been using an Optio W10 for a few months now. In general it does take really good pics, but the flash is fairly weak and is very very prone to puts "globes" in the picture due to dust reflection. For close-ups or simple snaps it's adequate, but an external slave flash will greatly improve your pics (it's on my must-be-bought list). Only a few slaves will work well with it -- I think the Firefly 3 is the one I've seen used.
I've never tried the soft-flash function. I didn't actually know what it was good for :-/
Buy a spare lithium battery (or two); if you look around you can find 'em for $20 or $30 and they are small and weigh nothing.
A nice advantage of the Optio over the Olympus is that it uses SD cards instead of the weird, harder to find xd cards that Olympus uses. The Oly is theoretically more shockproof, though. (I'll be caving this weekend with someone who has the Olympus so maybe we'll be able to take side-by-side pics of the same scenes with each?)
Here are a bunch of pics I took with an Optio W10 (with no slave) in Church Cave:
http://www.flickr.com/photos/beaker/set ... 330200279/
I also had a dive shop make a sort of neoprene sleeve cover for it (I think Bill Frantz originally came up with this design)... it's a great way protect it from small bumps and scuffs. I'll try to post pics of it later if I can remember!