I have had a 40D in the past, but actually have much more experience with the very similar 50D. Both are fine cameras, and I have sold and published many hundreds of photos taken with it. At this point in your bird photography pursuits, I don't think that "upgrading" to a different camera will be of much help. What you want to focus on is setting up better situations, not on gear and settings.
For 1.6 crop sensor bodies, such as your 40D, with the 400 f5.6 lens, the settings I would use for most bird situations are:
Aperture Priority, with the aperture set at f5.6 for most situations
White Balance: stick with auto for now, but start experimenting with the K setting. Take a shot at 5800K, then take another shot of the exact same thing at 6500K, then another at 4800K, etc. Then compare the different photos to the object you photographed, and determine which one looks most similar to the "real thing".
Shutter speed: I would just shoot at f5.6 and ISO 400, and let the shutter speed fall where it may. But, of course, use compensation to add light as needed (this will give you a slower shutter speed).
USE A TRIPOD! If you get in the habit of shooting birds at close distances, on a tripod, you will become accustomed to excellent, sharp, highly detailed images. After becoming accustomed to such great results, you will wonder why you ever bothered to shoot without a tripod. You will also wonder why you ever bothered to shoot small birds that were 80 feet away.
"Your" and "you're" are different words with completely different meanings - please use the correct one.
"They're", "their", and "there" are different words with completely different meanings - please use the correct one.
"Fare" and "fair" are different words with completely different meanings - please use the correct one. The proper expression is "moot point", NOT "mute point".