I will preface this by saying I am a little biased because I shoot with a Nikon D70 DSLR. On the other hand, I'm a die hard Canon point-and-shoot fan having had powershots for the past 6 years. Regardless, the XT and D40 are both awesome camera bodies. Quick comparison from what I know: D40 has a larger LCD screen, XT has higher pixel count (6MP vs 8MP on the Nikon, not a huge deal unless you plan on blowing up a lot of prints), the kit lens on the D40 is slightly better if you plan on buying it with the lens, and functionality-wise they both have really solid firmware. When I was making the plunge 3 years ago, it really just came down to me going into the shop, holding both of them and shooting a few test shots (this was before the D40 was out). I also managed to get a really good deal on the D70 + zoom lens at the time, so that played into the equation. Another small thing to note - being that I have fairly large hands the D70 was easier for me to hold as the body was somewhat bigger than the Rebel. I absolutely love the Nikon, but in all honesty you can't go wrong either way. Good luck on your quest and let us know what you end up choosing! Don't forget to post some pics on Yap when you get it up and running!

I was going to go with the Nikon D70 when it came out a few years back, because I started out with Nikon back in my college photo classes. Then my father gave me his hand me down Minolta 35mm camera with all his old lenses. Once Sony came out with the Alpha 100 and I could keep my Minolta lenses, I was hooked. I don't know much about Canon, and don't mean to make things more confusing for you, but I'm so glad I went with the Sony Alpha. They have a much higher resolution for the price and so many Sony and Minolta lenses to choose from. It's very user friendly and has the steady shoot built into the camera body, not the lenses like Nikon (which makes lenses far less expensive). Normally, I'm not a huge fan of anything Sony, but since it's really a Minolta, I have found it to be a great camera. Good luck!