The Panasonic HDC-SD1 is a perfect example of the blessings of solid state memory. Because video is recorded directly to Secure Digital or SDHC cards, bulky tape mechanisms and HDDs are nowhere to be found. This let Panasonic engineers create one of the slickest-looking camcorders ever. While it won’t have the cachet of the iPod or iPhone, it’s very sleek and stylish – a true small wonder. The -SD1 measures 2.9 inches wide, 2.71 high and 5.6 inches deep; it weighs 17.4 ounces with battery, SD card and strap.

The horizontal-style camcorder has a minimalist design with very few buttons. The plastic body has a silver tone while the LCD monitor door has a pearl-like luster. The front is dominated by the 12x Leica Dicomar zoom with a built-in lens cap. You can add filters and accessory lenses that fit the 43mm diameter twist-off ring. Other than a built-in flash and a recording lamp and remote sensor located under the lens, our tour of the front is complete. The right side has the adjustable Velcro strap, speaker as well as a compartment for USB and HDMI outputs. You’ll also find a small outlet for the cooling fan. The left side is dominated by the 3-inch foldout widescreen LCD monitor so you can easily frame your 16:9 videos. The LCD is rated 250K pixels, a solid number. Once the screen is open, you’ll find keys on the body that switch focus (auto, manual) and brighten the LCD screen. You’ll also find the SD card slot and another compartment for the A/V and component outputs as well as the mic and DC ins.

At its best quality setting, the $1500 HDC-SD1 records 40 minutes of 1080i video to an included 4GB SD Card (a similar model, the HDC-DX1, records to miniDVD and costs $100 less). Both use the AVCHD format developed by Panasonic and Sony. When we tested the HDC-SD1, no video editing software supported the format, but Sony says it will offer a free update this spring to allow its Vegas video editor to import such files. You’ll also need a very powerful computer to edit the video once the apps to do so are available, as well as an HD-DVD or Blu-ray drive if you want to export it from your computer in HD. Forget about using the software included with the camcorder; though you can use it to export standard-definition video to a DVD, it’s nearly useless beyond that. You can’t even use it to watch your footage full-screen on your computer.

Since the camcorder has component outputs and an HDMI port, however, you can play back the unedited footage in high-definition on an HDTV. Video I captured in well-lit settings looked gorgeous, and even video taken in relatively dim, indoor rooms looked surprisingly good–and much better than footage from the standard-definition camcorders I’ve seen. The HDC-SD1′s microphone captures 5.1-channel audio, too; I wasn’t able to test it with a surround-sound system, but it sounded quite good through TV speakers.