A lot of tradeoffs are made in designing bombproof cameras, and some image quality losses are part of the deal. That said, the better ones take decent pictures and a comparison test like DPR's is a good starting place.
"Blurry pictures" have a lot of causes and it would be worthwhile investigating why your missed shots were missed. Camera movement, subject movement, missed focus, and debris on the lens will all cause it. Looking at exif data of missed shots can often tell you what's happening. If you can figure that out then you can buy a camera that doesn't have those shortcomings (or at least lessens them).
Back to choices--yes, an S95 will give better results than any waterproof model, first because of its larger sensor and second, its better lens. Even somebody who's never used a camera can set it to "Auto" mode and take excellent pictures, so there's no need to be intimidated. As you gain confidence and push your photographer's envelope, you can attack the camera's extensive user controls and get shots that approach dslr quality.
Along with the S95, do look at the Lumix LX5 and the Olympus XZ-1, which are slightly larger but offer some advantages over the S95.
The Sigma DPs are a special category all their own, but I can't recommend them for the casual shooter. They're very tempermental with technique and many folks dislike the lack of zoom lenses.