Almost all kit lenses are not going to be the best glass, it is just the way it is. The camera itself is great, nevertheless you have the Nikon D80 to consider. The 18-135mm kit lense that comes with that camera is very sharp and good. Again, not the best that Nikon makes but it just goes with what you pay for. I would consider the D80. It is a great camera, and many prefer it over the 400D. But, there are also many that prefer the 400D. It is up to you. Have you used Canon before? Do you like the Canon ergonomics? I don't, but maybe you do. I think you saying that it is the best camera to go from point &shoot too is incorrect and is an area of contention among many. So, that is debatable.
You bring up a good point about sticking with it and going professional, if you decide to. Once you purchase a brand, many people stick with it. One of the hardest things to do is invest so much on lenses and equipment for one particular brand and then not be happy. So, when you decide what to go with, remember that you will be more than likely buying glass that will support your hobby for a very long time.
The 10.1 mega pixel sensor on the 400D is a great sensor. I have read that the camera does have a tendency to underexpose. So, be ready for that. Other than that, if you want to take the plunge go for it.
You can read the review for the 400D here at dpreview.com:
Canon EOS 400D / Digital Rebel XTi Review: 1. Introduction: Digital Photography Review
The Nikon D80:
Nikon D80 Review: 1. Introduction: Digital Photography Review
I think the D80 does better, but only by a little bit.
Once again, I urge you to consider other cameras before you just plunge into the Canon. The brand and camera are great, and you won't go wrong, but you can also consider other excellent options. Either way, good luck with your choice and happy shooting.
Lenses:
Another thing that should be noted is the importance of good glass, i.e., lenses. Some cameras might not be all that, but the glass is superb and brings out one of the best pictures you can see. The Canon kit is disappointing from what I have read, and what I have seen myself. So, if you can just purchase the body, if that is what you end up doing, and then take the plunge on excellent glass, you will be extremely happy.
Canon 400D pros:
Excellent resolution, lots of detail, not a leap from eight mega pixels, but certainly from six
Good color with selectable PictureStyles for different subject types
Good dynamic range (more than peers) with soft roll-off of highlights
'Integrated Cleaning System' designed to keep dust at bay
Widest range of image parameter adjustments among its peers
Low noise throughout the sensitivity range, noise reduction maintains detail well
Good in-camera image processing, resolution advantage shooting RAW is slight
Larger, brighter and more detailed LCD monitor
Re-designed user interface a great improvement over the EOS 350D
On-screen setting adjustment (ISO, WB, etc.) surprisingly quick and easy to use
Updated nine point AF system, proved fast, accurate and still good in low light
Very fast off to shot time (virtually instant), slightly slower if you want to read screen
Numerous small bug fixes improve usability
Magnification available in record review (although requires two button press)
Small and light but hand grip is still too small, can be uncomfortable for large hands
Excellent supplied software bundle, two RAW conversion options
Remote capture software included for computer controlled shooting
Unique JUMP mode in playback (by date, 10 or 100 images)
Value for money
Cons:
Kit lens disappointing, better to buy body only and spend more on a good lens
Sporadic continuous shooting once buffer is full
Occasional under-exposure issue with Evaluative metering
Average automatic white balance performance, still very poor under incandescent light
ISO, WB, Metering mode etc. not displayed on viewfinder status bar during change
Flash must be raised for AF assist
No Kelvin white balance selection in-camera
No spot metering
No mass storage device USB driver, poor WIA transfer rates (and awkward to use)
Opening the CF compartment door shuts camera down, loses any buffered images
Small viewfinder view
Nikon D80 pros:
Excellent resolution, lots of detail, not a leap from eight megapixels, but certainly from six
Excellent build quality, tight shut lines, quality materials
Instant power on, very responsive, very short black-out time, very fast media write
Fast, accurate auto focus (11 area sensor, similar to the D200)
Auto-focus assist lamp rather than requiring flash to be raised
Vibrant color response, similar hues to other digital SLR's
Reliable, sophisticated, if sometimes a little conservative matrix metering system
Control over high sensitivity noise reduction
Very large and bright viewfinder view with short black-out (quoted as 160 ms)
Extremely useful, customizable automatic sensitivity (ISO)
Easy to use playback / delete combination
Very attractive and intuitive menu system
Highly customizable, lots of camera and feature control
Status LCD panel on top of camera (we hate to see these go)
Unlimited continuous shooting in JPEG mode (with a reasonably fast card)
Good SD card throughput and USB 2.0 transfer speed
In-camera retouching features including D-Lighting and Red-eye reduction
Built-in wireless flash commander
Support for SD and SDHC cards
Good battery life, battery design provides detailed information to camera
Good large LCD monitor with wide viewing angles and removable protective cover
Dedicated help button provides in-menu assistance
Optional battery / portrait grip
Programmable FUNC hard button
Cons:
High sensitivity (ISO) noise levels higher than Canon EOS 400D
Noise reduction can be intrusive, although adjustable, more grain-like appearance
Default sharpness level perhaps still a little conservative
Disappointing automatic white balance performance in incandescent light
No RAW adjustment with supplied PictureProject, only simple conversion
Limited image parameter adjustment (especially for color saturation)
Slower maximum shutter speed (1/4000 vs 1/8000 sec) compared to D70/D70s
Price difference to the competition
source: dpreview.com
The great thing about SLRs is they're such long term investments and so interchangable too... not like a standard digital, where if you want to upgrade you need to upgrade the whole unit. 
