Few issues to address first:
blurry images - what shutter speed are you using? Old rule of thumb was to eliminate blur, shoot at 1/focal distance - meaning if you're zooming at 200mm then your shutter should be clicking AT LEAST at 1/200sec. Next thing is if you're shooting with wide open lens (f/2.8) you might get blur b/n what you're seeing to when you're actually depressing the shutter release since there's a chance that you moved the camera.
Distortion: 50mm on cropped body is b/n 75-80 on full frame (depending on the crop) and
normal lens is an 80 thus if you are going wider then that you will get distortion and the wider you go the more it'll be apparent, HOWEVER a lot will depend on how far you are from your subject.
What to get: camera, lens, flash, tripod.
Personally, I'd start with the glass first. Number of my colleagues who are Canon full frame shooters have the glass you are talking about and use that as the main lens. Another one that is also popular is 28-135 , I believe it is f/5.6. If you into more wider angle, since you already have a lens for close ups, then look into 17-40
Amazon.com: Canon EF 17-40mm f/4L USM Ultra Wide Angle Zoom Lens for Canon SLR Cameras: Camera & Photo It is a great lens on cropped body.
For portraits, I love seeing catch lights
Catch light - Wikipedia, the free encyclopedia thus I, 99% of the time in/ourdoors shoot with the flash. Plus a flash, I think, is an integral part of photography since w/o light you can't take an image REGARDLESS of how wide you can open the lens. Thus see if you get 580exII
Camera Body - should be you last concern, I feel, since every 12-18month a new body comes out. So getting a 50D, AS GREAT AS IT IS, right now isn't very cost effective. I think glass and flash will eliminate limitations you're facing now while getting a newer body in a year or so will only further boost your image quality.
Equipment is great, but knowing how to use it CORRECTLY or rather effectively is more important.
Tripod: I have mixed feelings about it only b/c if you buy a nice strong tripod, they are usually a bit bulky and taking on to the park with the camera bag and ESPECIALLY KIDS, isn't something often comfortable (at least it isn't for me) but they are great for macro work (by the way 28-135mm I mentioned above is a macro lens
EOS (SLR) Camera Systems - Standard Zoom - Standard Zoom Lens - EF 28-135mm f/3.5-5.6 IS USM - Canon USA Consumer Products).
Last point, I'm a Nikon fan, but work with Canon a lot and have number of collegues who have Canon thus what I say is a combination b/n my opinion and others but again
only an opinion.
Good Luck and enjoy shooting