Kundalini, I just bought the D40 upon many great reviews. I'll probably use this a good while before I upgrade to anything else just to get the feel. I'll try to shoot RAW when I get the D40 going. What will be my main advantage in doing this???
As for editing, where do I even start?? I downloaded Gimp but there are sooo many different tweaks. Guess I'll just have to mess with everything right?
Congratz and welcome to the Dark Side bwuhahaha
The D40 will shoot some excellant images. The D40 is a great little starter dSLR if you're just getting your feet wet into this game. The reason I mentioned keeping the P&S over the D40 is mainly because of your limited lens choices that will both meter and autofocus. That's not to say all the other lenses can't be used, they can. If you stick around long enough, you will read someone say "it's the lens, not the body", which is very true. Without a split prism viewfinder, I can't manual focus worth a crap .... old eyes.... but getting better in the macro world though.
I use LightRoom II to import, edit and convert to JPEG my RAW images. It is a wonderful tool because I don't spend a great deal of time post processing. One day I will take the time to work on that

. I also use an older version of Photoshop Elements and Capture NX for final tweaks. Shooting RAW will give you the greatest latitude for editing.
Nikkor came out with a 35mm f/1.8 DX lens recently that will fully function on the D40. I have the FX version and absolutely love the focal length on both cropped and full frame sensors.
Your edits are an improvement.