I searched for a "photo pocket/mini printer" but I found nothing under 100 bucks that was inkjet (not thermal), linux compatible, and suited for the project, if you know of one please tell
but I think we'll have to wait some time for it to appear on the market at a decent price I am not sure if this works: http://www.amazon.com/Canon-8827A001-CP-200-Photo-Printer/dp/B0000B0ADN
It is now $69 and should work with gutenprint: http://ubuntuforums.org/showthread.php?t=2077324