Yeah, what they all said!
I have the S2 IS and I love it still, but I went and bought a Canon 30D and love it more! However, I actually still use the S2 for macro shots and for video. I take it with me along with the 30D most days. I don't lug them both around, but they are both in the car at least. The 30D still goes with me into work though as I don't trust leaving it in the car.
I see no problem with what you are deciding to do. However, the only thing I would say is that if you really want a Nikon, it is a great camera but you would be more familiar with the controls of a Canon XTi, in my opinion. It will make the learning curve that less painful. It will be painful no matter what, but it is worth it. I'm still learning and will be still learning for a LONG time. For example, I bought the 50mm f1.8 lens that everyone raves about on here because I figured the f1.8 would be supreme in low light. Yeah, right. I'm sure it is but I haven't figured out the focus on that little baby yet so I get nicely lighted out of focus shots. I'll figure it out though and I will be taking nice shots of WDW at night in November, I'm sure. Either way, Canon, Nikon or Pentax are great cameras. I've also seen some great shots from other brands as well. Once you make the jump to DSLR it really does show that it is not so much the camera as it is the photographer that makes a good photo. Take the time to really learn how it is supposed to be used and when you are stumped and can't get that great shot, put it on AUTO and shoot away. Even shooting in AUTO on a DSLR will still be MUCH better in low light than the S3IS.
Ok, I've rambled enough now so my advice would be for you to:
Go for it!
Andy