Inkscape

If you haven't tried Inkscape yet, you should. It's an open-source graphics program, like Illustrator, but cheap. Very functional, totally free, the built-in documentation is pretty solid. Since it's open source with a good user base, I expect development to come along rapidly. Worth a look.
Here's a link to the Inkscape showcase.

Here's a link to an essential tool in Inkscape: converting bitmaps to vector graphics.

Here's me showing off the result of an hour playing around with bitmaps, fonts, and vector paths: a spoof on the Baby Einstein logo.