Nikon D40 vs. Canon S3IS?

Absolutely. The Nikon D40 is a DSLR which in all measureable ways is better than a point and shoot.

A DSLR has a sensor that is about 15 times larger than your Canon. It also has a better faster processor, faster more accurate auto focus, the ability to use interchangeable lenses which are optically superior and is fully adjustable. The larger sensor gives you much more dynamic range and much lower noise levels.

The only downside is that to match the amount of zoom that your Canon has you will have to buy at least one additional lens.

Definitely go wit the Nikon D40. DSLRs are a world of difference from point and shoots. Make sure the camera has a lens. Even if it doesn't, you can get an 18-55mm lens for around $100, and still be better than paying well over $600 for the camera at retail. Go for it!

Well, Susan is certainly happy with Canon. Even though her 40D and 1 series are nothing at all like your S3IS.

The DSLR is always the better choice for picture quality. What you are going to lose is the versatility of that long zoom on the S3IS. You can duplicate it on the D40, but it will cost you.

I'd keep the Canon until I could afford to add a longer telephoto zoom.

Trading a Conon for a nikon is a very bad idea. I do a lot of wedding and party photography for my party business. Canons are amazing cameras, they are impeccably built and have the greatest lens even on their point & shoots. I shoot with the canon 40D and Mark II 1Ds and they are comparable to the quality of film