What kind ultra compact digital camera is the best with shake reduction ?

8MP or more

If you go here, you can specify "ultra-compact," "image stabilization," and "8 MP." You will find only two current models, the Sony DSC T20 and T100. If you go down to 7 MP or 6MP, you will find many more to choose from.

I like the Canon Powershot SD700-IS, although it's only 6 MP. Not that you are likely to see much difference in the image... The SD800-IS is good, too, if you don't want to use the widest wide angle available from the lens for critical work and it's 7 MP.

SD700-IS:
http://www.steves-digicams.com/2006_revi...
http://www.dpreview.com/reviews/canonsd7...

SD800-IS:
http://www.steves-digicams.com/2006_revi...
http://www.dpreview.com/reviews/canonsd8...

Canon Elph series is the best, and you really do not need more than 6 or 7 MP. Panasonic (Lumix) is also great.

Good Luck

my suggestion
go to yahoo shopping
digital cameras
digital camera GUIDE
it will help you decide
be sure to check all titles in left column

sony dsc-t100
its 8mp
5x optical zoom
4x digital zoom
it has steady shot(shake reduction)
go to
http://www.dpreview.com/reviews/specs/So...