The Canon 40D is an excellent upgrade idea for any photographer looking to graduate from the camera they learned to shoot on.
The clarity is excellent and the larger LCD display makes it much easier to see whats going on. There are more advanced features that will continue to help you expand your knowledge and test your limits as a photographer.
My only caution would be low light situations. The auto-focus gets a bit sluggish in dark scenarios. Other than that, I haven't seen anything that I disapprove of on this camera.
Price wise, this camera is in a great position. Honestly, if you're contemplating the Digital XSi and you're not intimidated easily, you may want to consider this camera too. its a few bucks more, but the differences are great.
I could go into all the deets on this machine, but I won't. Check out the Wiki for all the technical info.
All in all, this is a solid camera and well worth the money.