Big_B,
A point and shoot (P&S) might be a good start. Check out Pekka's gallery entitled "Seven Months with the Canon G1." The shots that he made with this camera put many images I've seen made with DSLRs to shame. In fact, I like the images in that gallery better than the ones in Pekka's very fine D30 gallery.
If you decide to go with a DSLR, check out the Nikon D70/18-70 zoom combination. At $1300 for the camera and lens, it's a little over your budget, but if you stretch a bit, it will outshoot the point and shoot cameras. I realize that this is a Canon forum, but in the lower price range it looks like Nikon has the better camera-plus-lens option right now.
As far as Canon's current offerings go, you might want to wait until the replacements for the 300D (Rebel) and 10D come out in a few months, and shoot a P&S in the meanwhile. The current crop are good cameras, but I would hold off until an entry-level camera comes from Canon that has E-TTL2 (its improved flash metering system) and flash exposure compensation. I hope this helps.
Mike