Update: After playing around for 6 months, I bought high zoom lens (https://amazon.com/Nikon-55-200mm-4-5-6G-AF-S-Nikkor/dp/B000O161X0/ref=sr_1_1?ie=UTF8&s=electronics&qid=1225853269&sr=8-1)
This lens has Vibration Reduction, so when you are zooming in on something very far (in low light), it will take care of all the hand shaking. You don’t need a tripod. I got some excellent results from it. It is a must for this SLR. You will never feel bad about spending 200 dollars.
Absolutely no SLR experience did I have before buying D40. I used crappy Sony powershot before moving on to D-SLR technology. I have taken lots of photos of my 18 month old son (my main reason of buying D-SLR) and 99% have come out great.
Pount and shoot, digital cameras are slower and by the time they take a picture, kids close their eyes or run away or stop doing those sweet things which you wanted to capture. D-SLR changes that. Feel free to capture those moments and be assured that they will come out great. P&S cameras are pocket size now, so they are very handy and provide better zoom options but they are very limited in terms of shutter speed.
D40 is handy enough for a D-SLR and you don’t mind carrying a professional looking camera anyways :). Colors are crisp and the built-in flexibility is beyond the scope of this review . There are so many shooting modes like Child, Landscape, Night, Sports etc. All of them come handy while you are learning to unravel the potential of D-SLR. The micro mode gives you stunning photos of Flowers and similar things.
There is one problem however. These D-SLRs make you feel a better photographer overnight and make you crave for better and bigger lenses. Suddenly you want to take those zoomed-in pictures of golden horizon or mountains or night photos. The kit lens is limited to low zoom (high quality though). Also, vibration reduction does not come standard (Not a must with kit lens, but needed if you have high zoom non VR lens). I am sure once I move to 50-200 mm VR lens, things will be better for me. I am thoroughly enjoying the camera. I love it. If you want to move up to D- SLR photography and your budget is low, then go for this. You will never repent. Thanks to various digital photography sites like DPreview.com that has some wonderful people to help you out.