If you mainly use it for family photos then I would suggest the S110. Generally, the best camera is the one you have with you and the S110 will be with you more frequently. The reviews for both cameras are strong. You can get an overview of the revie...
I don't own them but from the reviews, they are both equally well received:http://www.claritific.com/cameras/Canon_EOS_Rebel_SL1/http://www.claritific.com/cameras/Canon_EOS_Rebel_T5i/ You can also compare the features:http://snapsort.com/compare/Cano...
I would still go for the SX260. It received great reviews http://www.claritific.com/cameras/Canon_PowerShot_SX260_HS/ and I like the preset post processing of Canon. But then again I might be biased ;).
Yes, the glass that you put between your sensor and the subject will have much more of an effect on your picture quality than your camera body. Sensors are these days quite mature and optimized but manufacturing flawless optics is still very difficul...
