...I am still interested in the D80, but I would like to see what else is out there. The 400D is a nice option. What about the 30D? The price has really gone down since the release of the 40D. What about portrait lenses from Canon?
30D prices have certainly fallen and may well continue to do so in light of the release of the 40D. However, if you want to invest in a second lens for your portrait work then you may be pushing the budget a step too far, especially if you want to add a flash unit etc., as the 30D is a semi-pro model.
All isn't lost, however, as I would be surprised if there aren't some relatively unused 30D models in pretty mint condition appearing in the shops or online auction sites as owners get seduced by the 40D. Obviously you need to be careful buying in this way but with the usual safeguards you could make your budget go a lot further. Of course, this option isn't restricted to just Canon.
Do your research on the review sites. Look for excellent image quality from cameras and lenses, make sure the camera can grow with you in terms of suitable accessories and don't get too hung up about the megapixel count. Then spend some time trawling the Net to try and find real world feedback from users of your target camera and lens. It may also be useful to start a separate thread here to generate some feedback from forum members who have bought used equipment.