I've used microtrack recorders for several years, and have always liked the sound of especially the microtrack II.
You may be alone on this. Both the MT2496 and MTII have notoriously noisy preamps and less than ideal A/D converters.
If you're OK in sacrificing the digital input functionality of the Microtrack recorders, your best option hands down is the the Sony PCM-M10. It's unquestionably the best 2-channel handheld recorder available. The R-09HR/R-05 recorders are a reasonably close second.
It's very difficult for me to recommend any of the other handhelds (i.e. Tascam/Olympus/etc.). Most important, they are unable to handle a hot signal on the line input w/o distorting. The specifications are miles apart from the Sony or Edirol products, but I realize they are probably much closer to the desired price point.
The only other recorder that would get an honorable mention from me is the Tascam DR-2d because it is cable of recorder 4-channels (but often requires the use of attenuators to do so).
Finally, if you do need the digital input, I would recommend you step up to the Marantz PMD-661 or a Fostex recorder, but those are all going to be full-size units. There is no other handheld out there (afaik) that offers digital in.