They also have better image sensors which means less degradation in low light situations, less graininess, and with better lenses, less distortion.
My take, anyways...
More clearly: that the pictures taken with point-and-shoot cameras are crappy is not the fault of those cameras, and pictures taken at the same time by the same person with a different camera would likely also be crappy.
Since more expensive optics usually tend to have a larger max aperture ...
and, considering that for most things I take photos for (usually something I'm selling) have a relatively low 'good enough' bar, a good camera is the cheapest way for me to get above that bar.
Amazon has a deal on that combo right now too http://amzn.to/brBxsE
However, you're certainly correct that conventional photographic wisdom is that people look better on longer lenses, for just the reason you cite -- wider angles can distort faces unpleasantly. It would have been interesting to see an analysis of lens length & perceived attractiveness from this dataset.
It depends on the sensor size. A 20mm lens in (35mm) full-frame is a very wide lens. A 20mm lens on a Canon/Nikon DSLR is the same as a 35mm lens on a (35mm) full-frame. A 20mm lens on a point-and-shoot is even "longer".