yeah, I also think that a dSLR can take images that are better then your P&S....we didn't have as much PP control in the film days, but SLRs were still popular then. The main thing with a dSLR is it needs a user who knows a few principles of photography. I just remember an acronym my grand dad made up when he got his first P&S camera (he had SLRs, but with Parkinson's and wanting my grandma to feel comfortable with a camera, he thought he'd get something simple). It was their PHD camera (press here dummy).
Since a dSLR is better at dynamic range, noise, DOF, and lighting options, I can't see how a P&S inherently has better PQ in camera.
As for the OP.....I have a 5D (which has a similar size to the 20D), and I recently got a XTi. I was worried that the XTi would be too small......but it's actually not too bad. It forces you to use your left hand to hold the camera....as my right hand doesn't have much to hold on to. But its small size is convenient. I also got the kit lens with it
The quality isn't as good as my 5D with an L lens.....but the camera and kit lens is actually very good for its compact size. I think it might become my totable camera setup when I'm not taking my 5D and bag full of lenses 
So the Xti is both a good budget camera, and a good way to stay light with a dSLR.