IMO Best bang for the buck...
Adorama is selling refurbished 30D cameras for $640 with free shipping. This is IMO an excellent deal and I have been shooting with a refurb 30D for well over a year now with no problems. Contrast that with my 10D and 350D which I bought new and needed to send each in for service within the first 90 days of ownership.
The 30D is an excellent camera and is head and shoulders above the 350D and not too far below the 40D in capabilities.
You mentioned, "Well basically Im looking for the over all package but I guess if I had to pin point one thing I would have to say I care most about Image quality."
I seriously doubt whether you will see a great remarkable improvement in image quality between the 350D and an updated camera 30D, 40D, XTi or XTSi. The 350D with a top-line lens is capable of excellent image quality. The operative phrase is "with a top-line lens". IMO, if you are working with the kit lens, you will notice a greater improvement by staying with the 350D and going to a top-line lens than by upgrading your camera. However, what you will notice if you upgrade to a 30D or 40D is greatly improved handling characteristics and improved features such as burst speed, etc..