Just the casing is waterproof. This is awesome because it gives you the option of replacing the waterproof door on the back with a non-waterproof door (included) in order to get much better sound in dry conditions. Another reason this is good is that you can replace the housing if it breaks instead of needing to replace the unit.
4gb should be fine, with my 4 gig card I once took over 2,000 photos using the 2 second interval mode. I also made a timelapse recording straight for 43 minutes (the file is 3.66 gigs on that one, I might have stopped recording before it was full, I cant remember).
But make sure to get a class 6 or higher memory card, it will perform best. Check this out:
http://www.newegg.com/Product/Product.aspx?Item=N82E16820211454 That is an 8 gig class 10 memory card for 19 bucks, free shipping. Just ordered one last week, got it 2 days later. I haven't had a chance to try it out though, but it's an awesome deal.
