Alright folks, here's where you wage your camera wars

I'm just tired of my old point-and-shoot and I want a nice, decent entry-level DSLR to ease me into the world of photography. Naturally, since we have a film Canon Rebel, I thought a Canon Rebel XTi would be a perfect next-step-up. However, my photography instructor has a Nikon D40 and, while I know she's supposed to churn out beautiful pictures, I must say that the picture quality is pretty phenomenal. Plus, the D40 is considerably cheaper. Whether or not that'll bite me in the butt, I have no clue!

So now I'm stuck. Canon Rebel XTi or Nikon D40x? From what I hear, the kit lens on both cameras are sub-par, so I'm a little torn on which one to buy since I don't have an endless budget to spend on extra lenses. Tips?