Yep the xsi is a good camera. I have a 350d, which is an older 8.2 mp camera. The thing has shot thousands of pics, and it won't quit. Look for an xsi in your price range, and you can't go wrong. The kit lense isn't much, but it will get you by until you can afford a 70-200f4L or better. A good sharp L lens is what gets you great pics. I also have a 28-70 Tamron f2.8 for portraits, and it is extremely crisp....
Get the xsi on Ebay first, then save up for some good glass in the future. You can't go wrong that way.