The D40 misses one of the biggest advantages of going with Nikon over Canon - lots more used Nikon lenses, as the D40 only supports the newer motor-in-lens options ... going with the D80 (a hair under $800 for the body only) gets you both a much sturdier and more capable camera AND compatibility with older lenses that need an in-body focus motor.

If I didn't have existing Canon lenses from the film days, I'd have gone with a D70 when I went digital. As it stands, if it's in budget - and it sounds like it would narrowly be for the original poster - I think the D80 is the best value for someone going for a new DSLR.

If you can't afford the D80 or won't ever want to look at used lenses, Canon starts looking a lot more attractive, and I'd recommend the Rebel XTi over the D40. I'm not sure which of the mid-line Nikons (D50/D60) support(ed) the focus motor.

As for a single lens, if you need a long zoom, one of the Sigma/Tamron options mentioned up-thread are your best bet. For a moderate zoom, the Canon 18-85 (84?) IS is a very very good all-purpose lens, and I believe Nikon has something like an 18-135 out there...