I'm actually considering the D40 for my wife. I don't know why she decided she wanted her own camera. She likes mine (D80) but she wants the D40 because it's smaller/lighter and in general less complicated.
OK, it doesn't have an AF motor in the body. That means she can't use my 50mm or my 70-300mm. So why would consider the D40 when I can still find a D50 refurb? She just wants to take good pictures when I'm not around. She wants a DSLR that's dead simple. She'll rarely change lenses (if ever). So for her, smaller size, larger LCD, and improved image processing trumps most everything else.
I get the benefit of keeping it in the Nikon family so we can share accessories and I can use it as a backup if I need to. I also hold out some hope that she'll catch the full-on photo bug with it.
The D50 and the D40 are both great cameras. If you're going to be buying a few more lenses right away (especially if you are going to get them used) then you probably want the D50. They both have their advantages that suit them to particular users. Don't be a hater!
D40 vs D50 comparisons:
DPReview.com
DPNotes.com