I have completed visits to local camera shops and did some major reading online and find myself leaning towards the Nikon D40 with the 18-135 lens kit. Any thoughts on this combo?
The 18-135 lens is a very decent entry level lens. If I were you, I would spend a few hundred more and get the D80. WIth the D80, you will be able to use lenses like the legendary 50mm or 85mm f1.8 or f1.4 lenses which are cheap and great for low light shots. (Okay the 85mm 1.4 isn't cheap but it's a great lens!) Would you like to be able to handhold your camera and take pictures inside your favorite ride with no flash? These lenses would work great for you.

Unfortunately, the shortcoming with the D40 is that although you can use lenses like the 50mm lenses, the autofocus function won't work with it.
Normally people will use fast lenses for low light photography or shooting fast moving events (like sports, dancing, head banging concerts) in which case, you would want to be able to use AF for faster focusing. By the time you get the shot focused on a D40, it may be gone w/out the ability to AF. If you don't anticipate shooting sports or fast moving objects, then none of the above matters, so please disregard.
I bought a D80 w/ the kit lens (18-135mm and it's a good combo). But I found myself lacking the low light capabilities and ability to shoot fast moving sports because the fstop wasn't fast enough for my needs and for sports the reach wasn't quite long enough. So I then got the 70-300VR lens. It's a good lens too, but in low light, shooting sports, I can't get the shutter speed high enough w/out compromising ISO noise. Since I don't know how to use software like Noise Ninja and Photoshop, I feel the need to get the shot right because I won't get a chance to fix it after the fact. I am now looking into f2.8 lenses, and into another fast prime lens like the 85mm 1.8 or 1.4 for low light, sports and portrait shooting. If you know how to use the correction software, then you can disregard the above. I know sooner rather than later, I'm going to have to bite the bullet

and buy the software and learn how to use it...But right now, I'm having way too much fun just taking pictures and learning how to use my camera!
I was new to DSLR also and went for the kit lens because I didn't really know what to look for, and figured I would get that for now and figure it all out later. (And that's fine!) But if you do a little more homework up front, you may be able to save yourself a few hundred in the long run by just going ahead and getting the good stuff right off the bat or saving up for it. Either way, I'm sure you'll make the best decision for you. I don't regret getting the kit lens. It's an excellent all around, entry level lens with good reach. The Nikon lenses only get better from there.
One more bit of advice I've been getting on various boards is to buy the best lenses you can afford to buy and don't worry so much about the body. Bodies are like computers; every year there's a newer, better one. But the good Nikon lenses, if you can afford them, will hold their value.
There are also some really good 3rd party lenses out there like the Sigma 18-50 f2.8 HSM ($499 @ b&H & Adorama). Sigma also has the 70-200 f2.8 HSM for around $800 as opposed to Nikon's version which is $1700 if you can get it. (I've been looking. It's sold out at the reputable places.) If you get the D40, you need to make sure the lenses you buy have the HSM designation if you go the Sigma route.(You can buy body only and order another lens separately.)
One last thing, I wouldn't buy it from
Best Buy or Circuit City. When I looked at my BB & CC, all they had was the junky lenses. They do not carry any of the higher end stuff. Where I live all we have is BB, CC and Ritz. Ritz is sold out of all the good stuff. I've had to do all my research online and buy from reptutable sellers. It's good to go there to get a feel for the camera body and weight, but better to buy online unless you have a really good mom and pop type place that is reputable and will tell you the truth about what you're buying. Ritz tried to sell me the D80 w/ 18-55 kit lens for more than I paid online for the body and 18-135 lens.

And I believe this was after everyone knew the D300 was coming out, which would then cause the cost of the lower lines to drop. Whatever you do, don't buy the 70-300 zoom lens without the VR. Everyone I know who has it, dumped it for the VR version. A lot of times companies try to package the cheaper lenses together to make you think you're getting a good deal. Don't buy it. Do your homework first so you don't cry later.
Sorry this is long....
Good luck!
