I'm putting my pennies towards an Olympus E-510. The body sells with a two lenses for under $700. The kit lenses are quite good and the Olympus features in-body stabilization.
http://www.flickr.com/groups/olympus_e500/
http://www.pcworld.com/article/id,144098/article.html
http://www.popphoto.com/cameras/4380...pus-e-510.html