Paul,
I have not handled a D40, but it *does* seem small-ish. I came from a Maxxum film SLR, and the D50 "fits" my hand in much the same way that my old 7000i's did, so that was a pretty seamless transition. My "strategy", if you want to call it that, was to buy into the Nikon system by acquiring the lenses I wanted and could afford, and a body with which to use those lenses. Many forum members here and elsewhere advise to put one's money in glass, which is what I tried to do, perhaps to a degree, at the expense of the body. I ordered the D50 body with the clear intention of buying a second body as soon as possible, with the following being the options:
A) Another D50
B) A D80
C) Wait for the next midrange Nikon body
B was, as Kyle has stated, 2X the money for less than 2X the camera; C is an unknown, and I love the D50, so A became my choice, and I like the fact that I won't have to learn another operation manual.
Of equal importance here is the overall "system" you will be buying into...lenses, flash, etc, etc. and not just the body. I assume you have compared the offerings that both Canon and Nikon (and Pentax and Sony??) have, and that your decision will give the proper weight to those considerations.
If you plan to buy from a brick-n-mortar store, I would suggest you ask to handle each model that you are interested in, with the intention of buying from that B-n-M store, if they are cooperative and helpful.
BTW, you may want to lurk around the Nikon forum over at
www.dpreview.com. Good source of information and image samples.
Hope that helps. Be sure and let us know what you end up with. I suggest a prompt visit to the House of Mouse, to "field-test" your new gear!
~YEKCIM