Totally aggree with every one, don't rush!!
Go into a shop and have a play with various models/brands.
As Jonny said if you go Canon route, 400d would suite you great, I've had my 350d for nearly 2 years and only just upgraded to a 30d as I got a good bargin, the 350 is now my backup. Definately the 50mm 1.8 and again to repeat if you get the actual 400d kit then you've got another lens to boot.
There are always deals on, but once you decide which brand/model to go for, drop Kerso a PM on here as he may be able to do say a 400d with kit lens and a 50mm too for your budget of £500.