The Olympus 850SW and 1030SW seem to be the more popular of the SW series from Olympus. Customer reviews are very good for these cameras.

If your looking to edit A roll video with B roll audio...this can be done in an editing program. Depending on the length of the project there might be a little drift over a long run of continuous footage, after 15minutes or so. This is due to variations in Frame Rate. Standard video is at 29.97fps with an option of either 32k or 48k audio recording on semi-pro camcorders. Most stand alone Audio Capture devices give you more options for kilohertz, anywhere from 12k to 48k (or more). If you record the audio in HQ you may have to change the hertz and still slightly adjust it during editing to keep in sync. When I'm working with B roll audio I usually record a little Nat Background Sound to use as a mask when I separate the audio track to re-sync. This helps fill in the hole that the edit makes. I just use the Nat Sound to fill in the silence.
If your Camcorder and Audio Recorder both have Time Code...syncing is much easier, but the Hertz must still match.

Good Sports photography is a matter of Light and Shutter Speed and how fast the Burst mode of a camera is. The D40 is a good camera but at only 6.1 megapixels you will loose a lot in cropping. But lets address getting better photos with what you have first.
You need to be in Manual Mode.
Set the ISO on the camera to 800. Yes, this is high. Yes, it will give you a slightly grainy image, but it will remove the blur from having a too slow shutter speed. What is happening now is your shutter is staying open a long time to allow a lot of light to hit the sensor. When the ISO is set high it needs less light so the shutter can be set fast to “Freeze” the action.
Next set the Aperture to around 9 or 10. This is how much light is let in. The smaller the number (4 or less) the more light that is let in and the faster the shutter can be. The larger the number (22 or more) the less light and the shutter has to stay open longer. That is why a Lens with a small Aperture number, say 1.2 or 2.8 is called a “Fast Lens”, because you can use Higher Shutter speeds. This also affects the Depth of Field (DOF). When the Aperture number is low and the Shutter high, only things close to the camera will be in focus and thing will get progressively blurry the farther away they get.
With these 2 things set you now adjust the Shutter speed until the meter (you see it in the bottom of the view finder when you look through the eyepiece) is at the center position. Now you have the right exposure. Your now ready to start shooting. You may have to constantly adjust the Shutter while following the action.
There will be cropping. A higher megapixel camera would be better at this point. When you have a 6mp image and you crop out half you are left with only a 3mp image. Not much left. The higher megapixel you start with the better.
Quick note about “Burst Mode”. This is where the more expensive cameras come into play. Burst mode on the D40 is only 2.5 frames per second and it take several seconds to write the information and clear the buffer before you can start shooting again. The D90 shoots at 4.5fps and clears the buffer much faster. Higher end cameras are around 6fps and keep shooting as long as you keep the shutter button pushed.
And lastly a 300mm lens of any speed is desirable to zoom in on the action. Fast lens are very expensive but worth it in the long run. The faster the lens the lower you can keep the ISO and have sharper images with less or no grain (Noise).
Hope this helps....good luck.

The Best camera for Sports Action Photography is a D-SLR. The Nikon D90 with a 300mm zoom lens will take spectacular shots and can record video at 24p, but is well over the $800 budget. Very few D-SLR cameras have video capability. There are a lot to choose from that will be good for sports photography such as the Canon XS, Nikon D60 and Sony a300 to name a few. These would be great starter cameras, work well for sports and priced right to still allow you to add the 300mm lens for shooting from the stands.