[Upaya]

hello,

like they always say: its the photographer, not the camera that matters.
these cameras are not intended for professional photographers, so it is hard (or irrelevant) to say which is better. it is really just a matter of preference.
many prefer the ergonomics and menu layout of the D40 (or D40x) to the xti. many argue over the type of auto focus. even though the xti is better in this sense it doesnt mean that you will get better pictures, although the xti is probably better for sports.

lenses are the most important to consider. canon offers some lenses nikon doesn't make, however, their lenses are more expensive (usually) and sometimes better. so, if someone is looking to buy a good and relatively cheap DSLR the xti and the D40x are great places to start. it is the lenses that you plan on buying that should really make the choice between these two great cameras.

the kit lens that comes with the xti is not worthy of the body. the kit lens that comes with the nikon is a very good lens (18-55mm). nikon builds bodies and lenses that work great together. nikon offers a 55-200mm VR (that is IS for canon users) for $250, and it is a very good lens. If you have the cash, you can get the D40x w/o body and buy the amazing all-in-one 18-200mm VR lens for ~$900, although it not readily available (but when it does become available, the price should drop). so these are great lenses for the Nikon, and in the future you can get a wide angle lens, 12-24mm, although it is pricey at about $900. the kit lens (18-55mm) and the 55-200mm should be great to start. the sb-400 flash is ~$100 and great as well.

getting the nikon body with lens and purchasing the 55-200mm VR (only $250) gives you a 18-200mm range (much of which with VR) for only $980

the canon xti has a few more controls, but has a lot more to offer in possible lenses. the kit lens is junk. the 17-40mm f/4 L is about $690 and the 70-200mm f/4 L is about $590. these two lenses cover most of what you will need. however getting the body and both lenses will end up costing about $1,900. it doesn't seem to make sense to make an economical buy like the xti to get canons great (and expensive lenses). the 11-22mm canon is a fantastic lens (~$690). good canon flashes are expensive. to get the body only and both lenses costs about $1,900 (17-200mm range), double the nikon price for this range. of course it is arguable the quality of the L lenses to Nikons lenses, but i dont see any better options to get the same range (do you?)

in short, both these cameras are fantastic. the xti has benefits that will win many over. to someone on a budget the nikon wins in the long-run. figure out what you need and what you will want, and go to a store and experience them firsthand.

hope this helps