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After I reviewed the Canon PowerShot TX1, I received several requests to review the Sanyo Xacti VPC-HD2 ($699 list price). Now, I've never used a Sanyo camera before, but I was game for trying the HD2, since it sounded pretty interesting -- at least on the surface.
The VPC-HD2 features a 7.1 Megapixel CCD, 10X optical zoom lens, a 2.2" rotating LCD display, full manual controls, and HDMI output. And did I mention the 720p movie mode that records stereo sound? If that sounds a lot like the PowerShot TX1, you're right. The main differences are size (the TX1 is smaller) and image stabilization (the TX1's is optical, the HD2's is digital and only for videos).
I'm yet to be won over by any of the camera/camcorder hybrids, which include the Sony Cyber-shot DSC-M1/M2 and the PowerShot TX1 that I already mentioned. Will the Sanyo HD2 break the mold? Find out now in our review!
What's in the Box?
The VPC-HD2 has an excellent bundle. Inside the box, you'll find:
Wow, that's quite a list there! I should mention that there's a model known as the VPC-HD2EX that also includes an HDMI cable. I don't believe that this model is sold in the US. One thing that's not included is a memory card, and there's no built-in memory either. That means that, unless you already have one, you'll need to buy yourself a large, fast SD or SDHC memory card. If you're just shooting stills then 1GB is probably fine, but for videos I'd go with something larger.
The camera uses a rather large (physically) rechargeable lithium-ion battery known as the DB-L40. Despite its size, the battery has a relatively modest 4.4 Wh of energy. Here's how that translates into battery life compared to other compact ultra zooms:
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There aren't many compact "big zoom" cameras out there, so this list is fairly short. The HD2's battery life is better than the TX1's, but it's still below average for the group as a whole. Picking up a spare battery is probably a good idea.
Speaking of which, I have to slip in my usual comments about proprietary batteries now. The DB-L40 used by the camera is expensive (priced from $37), and you can't use an off-the-shelf battery when the rechargeable dies. That said, you won't a camera in this class that uses anything else.

The HD2 sits in its cradle

The back of the camera dock
You can use the included camera cradle for battery charging, transferring photos to your computer, or connecting to a television. It takes around ninety minutes to fully charge the battery.
One nice feature on the HD2 is the ability to output both standard and high definition video to your TV. The dock supports all three ways of connection to a TV, via HDMI (cable not included), component, and composite cables. I grabbed the HDMI cable from my PS3 and hooked into the dock, and enjoyed watching photos and movies at 720p on my HDTV. Keep in mind that photos will not fill the screen unless you took them at one of the 16:9 resolutions.
If you want to connect the camera to a power outlet, computer, or TV without using the dock, then you can use the included cable adapter. This has a DC-in and USB + A/V ports, though only standard definition video output is supported.
Regardless of the way in which you connect to your computer, the USB 2.0 High Speed protocol is supported, so file transfers will be nice and snappy.
Oh, and if you want to charge the battery without lugging the bulky AC adapter around, then you can pick up the external charger that I have listed in the accessories section below.

The Xacti VPC-HD2 includes a lens cap with a retaining strap, so you won't harm your lens when the camera is not in use. As you can see, this thing is tiny.

Two video cables on top, then the cable adapter, remote control, and camera case on the bottom
Sanyo also throws some other nice things into the box with the camera. They include a wireless remote control, soft camera case, and a microphone adapter. This last item lets you attach most commercially available external microphones.
For a compact camera, the HD2 offers quite a few accessories. They include:
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That's not too shabby!

Ulead Photo Explorer 8.5 in Windows Vista
Sanyo includes several software products along with the VPC-HD2, and all of them are for Windows only. The only things Mac users can use are QuickTime and iTunes, which they almost certainly already have installed. For getting photos and videos off of the camera, and then organizing and editing them, they've provided Ulead Photo Explorer 8.5. While it's interface is a little "old school", Photo Explorer gets the job done. It offers various ways of displaying your photos (calendar style, by folder, or by album), thumbnail sizes are adjustable, and you can rotate and retouch images at the push of a button.
Speaking of editing, above you can see the "adjust image" window. As you can see, it offers nearly every retouching feature imaginable. Photo Explorer also has redeye reduction auto-enhance features available. It can also be used to perform basic movie editing.

Ulead DVD MovieFactory in Windows VIsta
If you want to make a DVD of your movies and photos then you'll want to use Ulead's DVD MovieFactory 5.0 SE. This lets you acquire video, edit it, add effects, and then burn a DVD. You can have chapters and menus, just like a "real" DVD, and the video can be 4:3 or 16:9.
The last piece of software that comes with the HD2 is a bizarre one: Xacti Screen Capture. This lets you capture whatever's on your PC screen and then save the resulting image to your camera. I don't know why you'd ever need to do that, but there you go.
Although the VPC-HD2's manual is nice and thick, it's some of the most user unfriendly documentation that I've seen in some time. The layout is confusing, it's not organized terribly well, and there's a lot of "notes" on each page. The manuals for the software are in PDF form on the included CD-ROMs.
Look and Feel
The Xacti VPC-HD2 is a unique-looking camera that is reminiscent of the vertically-oriented camcorders that are popular these days. It's not as small or as stylish as the PowerShot TX1, which is fine by me. The body is made of a mix of plastic and metal, and it's well put together.
While better than the Canon in terms of ergonomics, the HD2 still isn't great when it comes to ease-of-use. The controls on the back of the camera are quite cluttered, and the four-way controller is way too small and hard to push in the direction you want. There's not a lot of room for your right thumb on the back of the camera -- mine always ended up on one button or another. While the camera can easily be operated with just one hand, it feels more secure if you also hold it by the LCD. Like with all cameras and camcorders of this design, shooting in the portrait orientation is very awkward.
Since its design is so unusual, I would strongly recommend trying out the camera in person before you buy it.
Now, here's a look at how the HD2 compares to the compact ultra zoom competition in terms of size and weight:
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