I was too lazy to read through all the other posts so will probably re-iterate other advice to a degree, but here are my thoughts for what they're worth..
Having looked at your images on Flikr you seem to have absolutely no problem with composition; the ones I looked at were all very good.
While manual focus can feel more creative, there's usually no reason to use it over autofocus; which will be, for 99% of the time, faster and more accurate.
As others have said set the camera to use the single centre AF point, focus by placing it over the desired area of focus, holding the shutter button halfway to lock it, recompose and shoot.
Lack of sharpness is most likely due to your lenses, which are - no offense intended - pretty cheap and nasty. The 400D should have no problem resolving good detail as long as the lens is up to it.
If you've got the time and botheration to test the lenses you can set the camera up on a tripod, focus on something detailed (like text) and shoot with the timer or a remote. This will remove any human error you may be introducing through camera shake etc. You may also want to google how to test the A/F accuracy of your setup.
You're lacking background blur at large apertures because none of your lenses can really provide a decent aperture size - f/3.5 is pretty slow. As an example, a 50/1.8 wide open will give you more than 3 times the background blur of your 18-55 at 50mm and its largest aperture (f/5.6). The 50/1.8 is an excellent value lens to work with and I'd certainly recommend one; it is significantly faster and sharper than anything you have at the moment.
As you mention yourself you need to learn more about the technical side of photography (the relationship between aperture, shutter speed and ISO, the effect of aperture size and subject/background on depth of field etc), which is explained countless times on the interweb - google is your friend..
Post processing can do an enormous amount for an image (even if it's just adjustment of contrast, saturation and colour balance), so it's worth trying to get to grips with a decent image editing package (photoshop, gimp, picasa etc).
Finally, don't worry about shooting your mate - I assume you're doing it for nowt so they won't be getting poor value for money if you cock it up
It's all good practice for you and you're probably far more critical of your own images than they will be, so they'll probably like them even if you don't