If you are looking for a better entry level DSLR, go for this. Nikon D40 might be tempting, but it requires costly lenses for autofocussing, so may need to stuck with the lense that comes with the camera(Kit lense). If you dont want to change the lense then it is ok(but why do you need a DSLR then?)
If you have a 350D/D50 already, then upgrading to 400D doesn’t make sense. Think of something big.
For those who already decided to buy 400D I advice to go for the body alone and get a seperate lense.(there is an excellent lens - Canon 50mm f1.8 which much better than and cheap). I bought the same way, but bought the 28-105mm lense.
If you like to have an extra lense and will like to change the lenses frequently, then 400D is a best choice, as it has the built-in EOS cleaning system.
Have a looka t some of my photos at https://flickr.com/photos/mohan_subramanyan/ and more 400D photos at https://flickr.com/cameras/canon/eos_digital_rebel_xti/