matt has a great point there. If you cant see yourself buying more equipment (like lenses) later, then you should go with a slightly lower priced dSLR, like the canon 350d as someone mentioned earlier. If you know you'll be improving your setup later, then I'd say go with a more rugged, more capable body and just get one or two lenses to start off with. I would not recommend
ebay, as the prices there are really not that cheap (i got my cam cheaper from dell than anything I saw on
ebay). There was a deal for the 20d a couple weeks ago that had the 20d body for just under $1k I believe, which is incredibly low. Those discounts come rather regularly, so you might want to look into that. From canon, the 350d, the 20d, and the 30d would all be great cameras for your price range. just google 'dell discounts' and look at some websites that record all of the coupon codes and such for dell.
For lenses (i'm going to be continuing with canon for discussion purposes, but a nikon camera would also be terrific), I'd say definitely get a nice prime to start with. It might be good to start with a kit lens or a cheap zoom since there is more flexibility, but if you are ever stuck in a situation where you want the best sharpness and quality you can possibly dish out, the zoom would fall short. Rob had a good suggestion - check out canon's 50mm f/1.8 lens. you can get it for as low as $75, which is a
killer price for its quality. other focal length ranges would depend on what you like to shoot. if you like portraits or animal/nature shots, a wide angle wouldnt be as beneficial as a telephoto. you could get a 'superzoom', such as an 18-200mm that could cover both ranges, which would be very handy. Their optical quality (sharpness, etc.) isnt usually that great, but you wouldnt buy that type of lens for that usually, as they are more useful for their flexibility.