A good (and cheap!) flash diffuser for the Panasonic FZ18 (or any other camera). The diffuser is a translucent icing cup, taken from a can of refrigerator pastries. The icing for the pastries is packed in this cup, with a metal lid. Eat the pastries, throw away the metal lid and wash out the plastic cup.
The cup may then be placed over the raised flash unit and it will generally stay in place for fairly level horizontal images. For vertical images or steeply angled horizontal images, hold the cup in place with your non-shooting hand.
I generally find that ISO 200 or 400 (depending upon the distance to your subject) works well. For very close subjects, you will need to reduce the flash power -1/3 to -2/3 to balance the flash with ambient room light.
This same plastic cup may also be placed in front of the lens to set custom white balances. A special thanks to Isabel, my next door neighbor, for teaching me this technique.
NOTE: ALTHOUGH THE IMAGE SHOWS THE LENS HOOD MOUNTED ON THE CAMERA, BE SURE TO REMOVE IT BEFORE USING THE FLASH WITH OR WITHOUT THE DIFFUSER!