The T1i has a nicer screen and video. The value of video depends on what you think... but the price difference would be better spent on lenses- as many people have already said. The kit lens is fine, but you'll get better pictures buying an XS and a nicer lens than if you bought the T1i and just used the kit lens.
Cheap lenses with good value... the 55-250mm, the 50mm f/1.8 and/or the 50mm f/1.4.
As far as the XS being obsolete... I don't agree. It has live view, it has good resolution, it has good ISO noise levels, it has everything the 50D has except the build heftiness and ISO range (is the 50D obsolete?). The XSi is basically the same as the XS with a nicer screen, except that it is discontinued, while the XS is not discontinued, so you probably will not find a new XSi for cheap. But if you can find it used, then go for it.
The refurbished XS cameras on Adorama look like a good deal...