High quality yet affordable underwater camera?

This summer I'm going snorkeling for a few weeks in the Great Barrier Reef and I would love to get some great underwater photos. I have a Nikon D7000.Is there a certain kind of case I put around it to take underwater (this may sound completely ridiculous)? If not, what are some semi-high quality but affordable (under $300) underwater cameras?

I suggest Canon PowerShot D10 12.1 MP Waterproof Digital Camera with 3x Optical Image Stabilized Zoom and 2.5-inch LCD

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I have a Panasonic TS2 and very happy with it. We took it on vacations, to the waterparks, beaches, snowtubings etc., and it performs great! Surprisingly good image quality for this type of camera and HD video (AVCHD lite). Highly recommended. They are sold for about $250 now.

Have a look this one camera Canon PowerShot D10

Canon Powershot D10 Digital Camera goes anywhere, waterproof to 33 feet, cold resistant from 14-104 degreesF and shockproof up to 4 feet.

Some Great Features:-

1. Resistant to water, shock, dust & cold
2. 12 megapixel
3. 3.0x zoom and optical IS
4. Scene Detection Technology
5. DIGIC 4 Processor
6. 2.5" PureColor LCD II
7. Motion Detection Technology
8. Face Detection Technology
9. Range of shooting modes

The spacial waterproof cases for Nikon are quite expensive. Sometimes it is easier to buy waterproof camera instead.
Latest waterproof cameras are quite good. On very rare occasions they come faulty, but the same is with regular digital cameras.
If you want camera, that makes good quality pictures on land or underwater, then I would suggest to look into these three cameras: Sony TX5, Panasonic Lumix TS2 and Olympus Rough 8010.
And all three of them cost less than $300 on Amazon.
You just need to decide which features you need more:
Sony TX5 is waterproof to 10 ft, when Panasonic TS2 and Olympus Rough 8010 are both waterproof to 33ft. And Sony TX5 has got the lowest resolution from these three. It's just 10.2 megapixels. Panasonic and Olympus have a resolution of 14MP, which is quite a great difference.
All cameras are shock-, dust-, sand- and freeze-proof. But Olympus 8010 is also a crushproof and designed to withstand a weight up to 220 pounds.
Sony TX5 gives you the opportunity to capture panoramic pictures with it's Sweep Panorama feature. Your images are automatically stitched together, which gives you the extra-wide view of the scenery.
Olympus 8010 has got the panoramic shooting option too. It also comes with a built-in 2GB memory, which is more than most cameras available on the market.
Panasonic TS2 has a good quality video recording. Although all these cameras record video in HD format. But Panasonic TS2 seems to be the most expensive out of them.
But if you do not need waterproof camera right now, Sony are releasing a new Sony Cyber-shot DSC-TX10 in April 2011.It will have a resolution of impressing 16.2 megapixels. And it is going to be the first waterproof camera that can capture 3D still images. You can pre-order this camera and it costs $330.