There is little point in bringing a camera if you're just going to pack it away. The best place for a camera is around your neck and shoulder when you're hiking and not immediately taking pictures. When you want to be a little more ready, just aound the neck is better. However, that's not so good for hiking since it will swing around a lot. The camera is held more solidly against your body when the strap is around your neck and one shoulder.
If you're really into outdoor photography, get a camera meant to take little abuse. Some cameras are "weather sealed". I still am not going to wear one around my body in the rain, but it will do better surviving some inevitable wetness that sooner or later will find its way to the camera.
When I just want to or need to hike (getting dark, caught in thunderstorm, etc) but have a camera along, I wrap it and any separate lenses each in their own plastic bag. Good weather or not, I always bring one plastic bag for each such item. This is one layer extra protection since some water will always get into a pack when you're hiking in the rain, and when it's not raining the bag helps keep dirt off the item. These don't need to be ziplock or sealed bags. Just ordinary grocery store plastic bags with the excess wrapped around the item work well enough.
I haven't found the need for extra mechanical padding. My day pack has some foam padding up against my back, which keeps hard things from digging into me. Other than that, just put the pack down on the ground gently and you shouldn't need anything more. If you're not wearing all the clothes that you brought, then that extra windbreaker or sweater makes good padding for insurance. If you're using everything though, don't sweat it. Delicate objects like a camera are quite safe up against your back, so just be careful with the pack when you're not wearing it and all will be fine.