I bought my Nikon D40 at the beginning of December 2006. Prior to it I owned 2 other digital cameras: a Kodak 12x superzoom and a Fuji F10. The Kodak was my first digital camera and I learned a lot about photography while using it. I was pretty happy with it except for 2 things: high ISO noise and slow operation. I added the Fuji F10 to my collection because of very low (for a compact) high ISO noise and faster operation. They fit together into a small camera bag and were complementing each other very well - I would use the Kodak in good light and the Fuji in low light / indoors. All was fine 'till a friend let me play with his Nikon D50...
Although photography is just a hobby for me and I don't plan to make money from it (at least not in the foreseeable future), it became clear that I needed to upgrade to a DSLR to get the speed, image quality and flexibility that I was looking for. So I decided on an entry level DSLR to keep the costs low... went to several stores and played with both the Rebel XT and Rebel XTi, the Pentax K100D and the Olympus E500. I liked the Oly E500 the most - the way it fit into my hand and the dust cleaning feature were decisive (I guess most of the P&S owners that consider upgrading to a DSLR have the dust issue very high on their 'cons' list). I was about to buy it when the Nikon D40 was announced... I waited until I could handle one in a store... and it was love at first sight
You can compare the size of various cameras on paper and conclude that there is not much difference between them... everything changes when you actually get the camera in your hands... and the D40 was the best fit for me. The lack of in-camera focus motor was not an issue for me - I had no other lenses and didn't plan to buy that many... mostly a telephoto zoom (and the old 55-200 AF-S was on my list) and maybe a prime, but not in the near future... 3 focus points was 3 times the number of focus points I had on my P&S cameras, and I love how they lit up in bright red when the AF locks! 6 megapixels were good enough for my needs. Didn't use the exposure bracketing at all with my Kodak... More important though was the high ISO IQ, and the D40 has not disappointed me - the F10->F41 Fuji's may have the lowest high ISO noise among the compacts, but they are no match even for an entry level DSLR... And did I say fast? Turn the D40 on and it's ready to shoot before you are. The auto-focus is fast enough for me even with the kit lens... again, no comparison with the compacts. The viewfinder was so nice and bright compared to the EVFs I was used with, that in the first few days I even forgot to look at the data displayed at the bottom

. I set it from the very beginning on Auto ISO with at least 1/60s shutter speed and up to ISO 1600, and I forgot about ISO for a while...
As soon as Adobe released ACR 3.7 that recognized D40 NEFs I switched to RAW. Configured the Fn button to change ISO. Set WB on Auto (prefer to fine tune the WB in post processing), focus to Spot, AE-L/ AF-L on AE Lock/Hold and switched the interface to the classic look (got bored with the animation for shutter speed / aperture pretty soon). The only things that I change from time to time with the "info" screen are the AF-C/AF-S and the metering modes. Got the 55-200VR when it was released, and I'm pretty happy with it. Also got the SB-400 and was impressed with some bouncing shots indoors. And when those rumors about the new AF-S primes materialize, I will probably buy one - not sure yet which

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As you can see, I'm very happy with my D40. There are some things that can be improved though:
- the AE-L/AF-L button is too close to the viewfinder, and whenever I have to press it I'm always wary of touching my eye with my thumb
- the left and right focus points are not as good as the cross-type center focus point - there were cases in which the camera could not lock focus when I used them - for example in landscape mode with thin vertical structures (the Washington Monument from across Tidal Basin) - the moral of this story is that objects should go through these sensors and not along them to facilitate focus lock
- there is some speculation on the Internet that the AA filter is weaker on the D40 than, say, the D50, and that makes the D40 images appear more sharper. The downside is the increased occurrence of moiré - and I got a few shots that exhibit clear moiré...
- the four-way control is an easy way to change which focus point to make active - but when the camera enters power saving and the viewfinder info is turned off, the four-way control is also turned off, so I need to half-press the shutter or to press the "info" button to bring everything back to life first - I'd like for the four-way control to do the same, so I can change the focus point with one press and take the shot immediately after
- I could use another programmable button - e.g. for changing metering modes
- the current ISO SHOULD ABSOLUTELY be displayed in the viewfinder - both in manual and auto ISO modes!!!!!
So far I'm very happy with the D40 - always looking forward to my weekend photo "getaways"
Darrin