You can definitely look forward to better high-ISO performance from even an entry-level cam like the D40.

Attachment 38269
1/13 sec., f/4.5, ISO 1600 @ 34mm

I don't have the full-size file on me, obviously it would appear grainier at full res, however it's still good stuff for at least an 8x10 I'd say.

If you're savin', you might want to save a little more for a D80 body and a 50mm f/1.8. That'd be an inexpensive low-lighter's setup. The D40 just doesn't have a very affordable selection of large-aperture lenses with focus motors. You'd be looking at $375 for a 30mm f/1.4 or $475 for an 18-50mm f/2.8 (although that lens is worth getting for many reasons anyway, and would be a good kit lens replacement).