Despite the 17-85mm not being very popular on this forum, I have to admit I don't find it's shortcomings that bad. True, it's not the sharpest lens Canon makes but it's by no means the softest. The biggest problem with the 17-85 is the wide end, 17mm probably has the highest distortion of all Canon zooms, edge softness and high CA. By 24mm almost all of these are corrected and stay constant throughout the rest of the FL range.
Some of these shortcomings can be easily fixed in post, PTLens or DxO can fix the distortion and vignetting. But you can't fix the softness.
The positives of the 17-85mm are an excellent range for a walkaround lens (I personally tend to use the long end much more then the wide anyway), the really fast and accurate USM AF, and the very efficient and convenient IS system. These positives easily outweigh the negatives for me personally, and I can't justify upgrading to a 15-85mm or 17-55mm for the marginal IQ improvement that only I will notice anyway (my friends and family really won't see it unless I point it out to them, just like my 70-200 shots).
I will say though that I got the 17-85mm as the kit lens with my 40D. I was debating getting the 40D body only and picking a Tamron 17-50mm instead, but the kit lens came out to half price of the Tamron if I had gone for body only + Tamron route, and I have to say I don't regret my choice at all.
Whether the 17-85mm is a big enough upgrade for you (longer range, slightly better build, much faster auto focus and possibly better IS?) to justify the price is a question for you. The 17-85mm is pretty cheap on the second hand market so shouldn't be overlooked too quickly.