I love my DL but I do not have a K100D, which is the current model with image stabilization - but I've heard nothing but raves about it and specifically the IS feature. I do plan to upgrade to a K100D or K10D at some point, and I'm sure that I'll never want to go without in-body IS after that. I'm no expert on the different lines but I do try to do a lot of research and keep up with what's going on.
I do understand that there's a debate about in-lens vs in-camera, but as they say "the proof is in the pudding" and K100D users report regularly gaining 2-3 stops thanks to the IS, the same as the in-lens design. I think any advantages to the IS being in the lens are minimal at best, while the advantages of having it in the body are enormous and obvious, especially combined with Pentax's long history of quality lenses. (Unfortunately, the success of the Pentax DSLR line recently has meant that the value of used lenses has shot up dramatically!)
Any concerns about reliability should be tempered with the fact that an IS lens should have roughly similar failure rates - and the K100D body costs about the same or less than most IS lenses, so replacement cost would be similar!
About the kit lens - the Pentax 18-55 that's included is generally considered to be pretty good - not incredible, but certainly competent. From what I've heard, Canon's kit lens is subpar, hence many skipping it. Plus, as Jeanne says, the lens is dirt cheap when bought in a kit, so it's a no-brainer. It's also very small and light.
In terms of selections of lenses, many rate about the (IIRC) 28-200mm lens for the Nikons and I think Canons - there are lenses with the same range on the Pentax side but nothing super high quality. On the other hand, Pentax has the best primes in the business (including the 50mm 1.4 which is reportably astonishing and the best SLR 50mm there is, for a mere $160 after rebate) and the other full range of primes available from any of the big players, and many of their zooms are very good. They also have the Limited line which are all extremely high-quality but pricey. Plus the usual collection of Sigma, Tamron, etc, plus the older lenses (basically, any Pentax lens ever made) all work wonderfully, even old screw-mount ones (with an adapter). Ultimately, I think that each of the Canon/Nikon/Pentax lines have pretty solid lineups of lenses, each with a few small strengths and weaknesses. Oh yes, and Pentax will release their first ultrasonic focusing lenses next month along with the K10D, the lenses will presumably also be weathersealed to match the camera.
Honestly, I think the lack of in-camera IS is a huge problem for Canon and Nikon at the moment. They're painted themselves into a corner now by promoting the concept of in-lens IS, especially when the bodies themselves cost the same or more as the competition (Sony/Pentax) with in-body IS.
My guess will be that we'll see them both release cameras with in-body IS in the future, claiming that they're for the "consumer market" which still promoting in-lens for the "professional" - this will give them the wiggle room to compete better feature-for-feature while not having to give up too much on their body-vs-lens position. Over time, it will be standard in pretty much all digital cameras including pro-level SLRs and the in-lens IS will go away except for specialized applications. I believe that the lens with IS in them are also a bit larger and heavier, too, while the in-camera IS makes the camera itself slightly heavier but not significantly so.
That's just my guess about what they'll do - but I think Canon and Nikon will have to do SOMEthing. Pentax generally sticks to camera shops rather than big box stores, but if your average consumer was shown a K100D for $600 or even a Sony for $900 vs a Canon or Nikon plus IS-lens for probably over 2x the cost, that's a big problem for them. There's no question that all the DSLRs out there are spectacular - the IS is really one of the only significant differentiators at the moment IMHO.
If there are concerns about image quality, I'd really recommend checking out the Pentax DSLR forums over at Steve's Digicams or DPReview, where you'll find countless examples of just what the camera can do - many of them really amazing. The K100D for under $600 is a stunning bargain, no two ways about it.