I'm about to just say, "no DSLR for me." I'm getting the feeling that unless you spend $1,000,000 on equipment, you won't be happy with the results.
Hey, the worst vice is advice, and that's usually no joke. It's totally not the case that you have to spend a king's ransom to get a kit you will enjoy.
If you aren't ready to buy somebody elses fantasy kit (or your own, for that matter) I think a great strategy would be to start building it up with essential pieces. Avoid items you will definitly 'have' to replace later (as in the images produced are just sub par) and focus on ones that can become a permanent part of your kit. You want the 40d. Great, go for it. Some people will say the Rebel because it's cheaper and leaves you more cash for lenses etc. That's up to you.
Now, the whole "good glass" (glass...don't much like that term for lenses. sounds too cultishly cutesy) idea is a good place to start, but often the truely great lenses will break a beginner's budget. So, smart lenses are your next best bet. The highly regarded 50mm f/1.8 is a good example of a smart buy. It lacks the versatility of a zoom, but gives you a much greater aperture range than any kit zoom. Also, it is a prime lens, and as such will force you, to a certain degree, to push your creativity. You will have to position yourself, you will have to find your perspective, you will have to zoom with your feet, and you will have a lens which yields great images in terms of sharpness and bokeh. It's construction is fragile, and it is definitly breakable, but it's a good producer for under $100.
Along the same lines, I might suggest the 85mm f/1.8 as a compliment to the 50. At $350 or so, it also falls into the smart lens category. It is well regarded in terms of image quality, and is a lens that would offer you more length. Admitedly, this kit leaves you lacking on the wide end, but it also a)falls within your budget, b)starts building you a kit of good quality lenses, and c) doesn't get you an unremarkable kit zoom that you will want to cast away inside of a year.
I dunno, there are plenty of people who will argue the merrits of a kit zoom, or a different camera, or a bigger budget, but this is an example of a kit that falls within your budget and in my opinion provides a lot in terms of enjoyment/learning/creativity/quality potential.
$1400-$1600 for the camera and 2 lenses.
40d (rebate available)
http://www.bhphotovideo.com/c/product/518207-REG/Canon_1901B004_EOS_40D_SLR_Digital.html
50mm f/1.8
http://www.bhphotovideo.com/c/product/12142-USA/Canon_2514A002_Normal_EF_50mm_f_1_8.html
85mm f/1.8
http://www.bhphotovideo.com/c/product/12182-USA/Canon_2519A003_85mm_f_1_8_USM_Autofocus.html
I'd also advise stretching your budget a bit and getting UV filters for both and a lens hood for the 85. The 50...I probably wouldn't bother with a hood, but that's up to you.
UV filter (50)
http://www.bhphotovideo.com/c/product/72713-REG/Tiffen_52UVP_52mm_UV_Protector_Glass.html
UV filter (85)
http://www.bhphotovideo.com/c/product/13078-REG/Canon_2605A004_58mm_Haze_UV_1_Glass.html
Lens hood (85)
http://www.bhphotovideo.com/c/product/162046-REG/Canon_2655A002_ET_65_III_Lens_Hood.html