What kind of commercially-available camcorder has the best picture quality?

I want to buy a camcorder for when I have kids, but I want it to have decent picture quality. How is MiniDV? Is it good picture quality? Is it better or worse than Digital-8? Should I just skip tapes altogether and get a DVD camcorder or a pure digital one?

There are two main factors affecting picture quality when choosing a camcorder.

One factor is the quality of the image formed in the camera. This is affected by such things as image sensor type /quantity / size (3 vs 1, CCD vs CMOS, 1/2", 1/3", 1/3.6", 1/4"), lens technology (construction, materials, focus system, etc), and picture processing technology (noise reduction, color correction, etc). These things vary considerably between manufacturers and models and evaluating them can be very subjective because what looks "good" may not always be that which is the most technically accurate.

The other factor is the quality of the recorded picture once it is played back. MiniDV, Digital8, and DVD are all digital recording formats and the two tape formats (MiniDV and Digital8) will essentially be of identical quality. The DVD will have a lesser recording quality than the digital tape formats because the data is compressed more than when recorded on a DVD which will result in some loss of detail.

By "pure digital" I would assume that you mean a hard drive recorder. This too will give essentially the same record quality as a DVD camcorder, which is inferior to that of the digital tape formats. It is also less convenient because it is more difficult to dump the contents than it is to swap a tape or DVD and you must erase before you can record. This is not something that you can do at the last minute.