I've been using the S1 underwater for a few months now.... the lag time is not a big issue.... all depends what youre trying to shoot, of course.
Certainly a bit of practice, and knowledge about 'pre-focus' techniques will help.
I find a bigger problem, particularly when shooting small things, is simply not being able to see them on the rear display, as the resolution and refresh rate are so much worse than ones own eyes. (but check my pic of a glass shrimp on a blue anemone, which I am particularly pleased with.... )
If you're going to do 'holiday snap' kind of stuff, then I'd certainly recommend it as a versatile camera... the mix of features makes it a very practical surface P&S camera (sufficient for me to ditch my SLR when weight is an issue), and the video mode is excellent.... but budget for a 1G CF card.
Negatives... seems to be difficult or unduly expensive to get a red filter to fit on the front of the case... not much talk about them on here, but you'll need one for 'coral' depth photos, in daylight.
The link below will show you some of what the camera can do.... despite the lack of experience of its user!
www.pbase.com/hamilton_w/water