some of the nikon lenses don't work with the D40. or, they don't work very well. getting the D60 is worth it, no matter how much more you spend. if you need to keep the dollar amount low, buy it used from somebody on craigslist.
i spent many, many years of my life selling people one form of gear or another (but not cameras), and if there is one thing i learned, it's that the first time you buy something, it's usually just to figure out what you should have bought.
speaking as a nikon shooter, i recommend canon (see the previous paragraph). generally better low-light performing lenses (which also means better action photography lenses) and generally less expensive. also, there are simply more canon bodies and lenses on the market, which is part of why they are generally less expensive, and it also means there are more craigslist deals.
that said, i agree you can't go wrong. the cameras available today are shockingly good, except for the random dog here and there. don't be afraid to expand your search beyond the big two; you might be pleasantly surprised at the prices you find (think pentax, sony, and fuji), although bear in mind their lens options are usually much fewer.
here are a couple good gear review sites:
http://www.photographyreview.com/
http://www.dpreview.com/
best of luck to you!