This is what I think I know, but I might be wrong on a few details...
Curlybird:I've been into birding since January but don't know anything about spotting scopes. I have a few questions:
1. Are they only for DSLR cameras, or can they also be used with P&S cameras?
Field scopes are generally not for cameras at all, just for viewing. There are the so-called "digiscoping" adapters that let you attach a camera to a field scope. Typically, they're for P&S cameras more than DSLRs (I guess they figure if you have a DSLR, you can just buy a lens).
Curlybird:2. Do they let you take much closer shots, or are are they mainly for SEEING closer so you know where/what you are photographing?
Again, they're primarily for viewing. How close they get you is up to the scope. You can spend $100 on a scope, or you can spend $3000. Like most things, you get what you pay for.
Curlybird:
3. If they can be used with P&S cameras, and based on the cost of a decent one, wouldn't someone be better off just getting a DSLR camera with a long-range lens?'
I guess it depends on what you use it for most of the time. If you primarily like to watch, but want to take the occasional photo, the scope seems like an obvious choice (you'd probably pay less for the same magnification and image quality). If you're primarily about photography, you'd most likely be happier with a DSLR+tele lens. Not only do you get the magnification of the lens, but you get all the other advantages of an SLR camera.
I could see someone saving money by buying one of the cheaper scopes with high magnification (though at a loss of image quality), and just digiscoping to get some high-magnification shots (even though they wouldn't be as clear). At the same time, though, there are cheap, but long SLR lenses available, too. I guess you'd have to really run the numbers and compare images to see what would work best for you. I still think that you'd be happier with a DSLR if you're primarily going to be taking pictures.