XT vs XTi?

[fotogmarc]

If you can find a good lens in your price prange go for the XT.
There doesn't seem to be many lenses that would be a better replacement of your kit lens for $200. (Check lens reviews)

I'm sure someone in the forum can suggest one (or two) maybe there are deals out there.

Don't forget about extras: Tripod, extra battery, flash, carrying case. These will easily cost you over $200. If you go with a new XTi you're still stuck with the kit lens and a longer wait for a new one. However, it is always nice the have that factory fresh smell of a new camera and the extras the others have pointed out.
Don't get too down on the kit lens. I'ved used one and they are not that bad. Can you compare them to a $600 upgrade? Not really, but they still get the job done.

I base this on my own experience. I purchased the Olympus E500 with a twin lens kit (18-45mm, 40-150mm) back when they were about $600. I wanted an entry level Dslr with good performance and lenses to match. I have not been disppointed and when I'm ready to upgrade I'll have a better idea of what I want, without any remorse about spending too much on this gear.

Being as the XT is used there's always a risk. I avoid used equipment, unless the seller is offering a solid warranty. Make sure you look inside (take off the lens) the camera for sand, condensation evidence as well as the contacts for the battery and memory card. These will give you an indication of how much it was used.

Best of luck with what ever you go with.