I just purchased the XSi last Friday, upgrading from an old XT. I originally pre-ordered with Amazon.com (back in February when the release was announced), but since the date was bumped back, ordered it online from Circuit City (not available in stores here in Tucson yet).
I haven't had too much of a chance to play with it, but so far I love it. The larger LCD, ISO button on top, enhanced grip, better battery--pretty much everything's an upgrade for me from my XT. I still think the lenses make the biggest difference, but I'm only a hobbyist and haven't used the higher-end cameras.
So why not the 40D? Price difference for what you get (especially with the IS 18-55 lens for only an additional $100 with the XSi) and the built-in flash. Yes, you can always add a flash, but the built-in flash is quick and easy. I find myself using it even in some landscape shots for effect.
Looking forward to getting out in the field with it, plastic body and all!