VIDEO SECTION: I picked up the US version T1i and shot it all last week in Haiti. The video section is really quite good, although not as good as the 5D Mark II. While the camera advertises 1080i, it only operates at that resolution at 20 FPS (frames per second). So, if you're shooting anything with even a little movement, you are much better off to set it at 720 (the medium quality setting) and you get back to 30 fps, where things look great again in terms of movement. if you are shooting simple interview stuff in low light, the 1080 setting would be fine, but there is a lot of compression. For me, the T1i will likely remain a 720p camera but for $1K US, what a steal!!!! This camera might be the best POV (point of view) camera to bolt onto roller coasters or use in auto racing. The glass is cheap compared to "real" film lenses or high end video, and you can get great results, but don't go to the 1080i setting... ever.
The Kit Lens: The lens is the one that coms with the camera... 18-55mm f/3.5-5.6 usm IS (28-90mm in 35mmFF). The lens is sort of cheap but sharp when you get it in focus. It has a very short focus throw so it's tough in low light. When set to video, the AF is virtually useless in low light and manual works much better. In direct sunlight or around pointed light sources, the lens definitely tends towards flare. I'd definitely buy the lens hood for this. I know this performance would improve with faster glass attached. The 17-85 usm IS would be a much better choice for the camera for video use if that was what you're going to do with it.
Audio: the on board mono only microphone is VERY directional. I made the mistake of setting the camera down to record some people singing on the trip and I moved away from the center of them and the quality was poor, losing all high end. When you are standing right in front of what you're shooting, the quality is excellent. But for serious work (which is certainly possible with this camera), you'd want to record with a separate audio recorder like the Edirol or Marantz, or even one of the $200 Olympus flash recorders. Sadly, there is no external mic input, but then Canon wants to sell 5D Mark II's...
Still Photography: On the still side, it produces fantastic results and the digimark 4 chip has tons of dynamic range giving way superior files as compared to the 40D. There is lots of room to play in post in both video as well as the still images.
Overall, for $1k, I am very impressed with the latest Rebel. It offers amazing versatility in a super small and light-weight package. I used one 16G type 6 SD card for an entire week of shooting and the battery life was nothing short of amazing. It's a great little box that does a lot of things pretty well. If you don't plan on using it's video capabilities, however, the Rebel XSi will save you $150 but you'll lose the latest chip technology. My vote would still be to go for the T1i, as shooting video is sort of inevitable as we head towards 2010... patrick murphy-racey