Indoors, people..
People : 35mm speak I'd go for something that covers 50mm (natural eye length) and 100mm (portraits). Using a 400D you've a 1.6 crop factor so you'll want 30-80mm approx. There are lots of lenses that cover this range.
Indoors : here's your problem. You should get really fast lenses f2.8 or better, but you wont do that for <$300 IMHO. Plus you'll need a flash