Decisions: Lens or Body first?

Your body is fine (no puns intended). Really! Don't get another body to get rid of the blurry photos. They are blurred not because of inferior body or software. Nor for the lens actually. If you want to get better results, Try using a higher ISO rating so your shutterspeed can be increased and if you really want to get another lens I suggest getting one with VR. That helps a lot!

EDIT: For instance the Nikkor AF-S VR 70-300/4.5-5.6G IF-ED Zoom would be a very nice addition to what you have now (range) and it has VR (stabilisation) so it allows for less available light than you can shoot at now and still get good shots. Plus, for games you might want to get more range (pref a prime 2.8 but for other uses a zoom might be nice) to be able to capture more from up and close. It will cost you a little though ;) I think (guessing at exchangerates) about $450 for this lens. But since your work asks you to do this for them maybe they can spring a few (if not all ;)) dollars?

Good luck considering, buying and shooting

MORE EDIT:

Could you possible show us a photo to get an impression of what exactly the blurryness is? At 1600 (wow, that high already?) a lot of it may come from grainyness rather than from movement (of subject or shaking camera).

Also:

Like I mentioned and others seem to prefer too is a fast prime or zoom in the tele-range. I maybe mistakenly didn't go into that enough but that was mostly due to it's price. The Nikkor AF-S VR 70-200/2.8 G IF-ED is what I would get if money wasn't an issue since it's about $1850. Of course there is also the Nikkor AF-ED 80-200 f/2.8D at about half the price and at about the same $$ is the Nikkor AF 180F/2.8 ED IF which is really nice.

Something you may want to consider when buying a lens though is that you already know you are going to upgrade your body at any point in time. If you go beyond a D300 (which I would suggest if you already have a D80) you should take into account that you might want to get different lenses for Fullframe.

Again, good luck..

And another vote for the lens. You won't believe it, but this decision can be justified mathematically. And you won't believe it, but that's what I'm going to do...

A D90 and D300 are twice as good in low light as your D80 (and my D200). That's a gain of one stop.

The D700 and D3 are twice as good again, for a gain of two stops.

So, to lower the ISO from 1600 to 400 (in terms of image quality), you'd have to upgrade all the way to a $2500 D700. The D300 won't cut it. And with a D700, being a full frame camera, your 18-135mm lens wouldn't work properly.

So how about lenses...

Your current lens shoots at f/5.6 at 135mm. An f/2.8 70-200mm lens can shoot at f/2.8 at any zoom range. This is also a difference of two stops.

In other words, with an f/2.8 zoom you can lower the ISO from 1600 to 400 on your D80. And you can get a third party (Sigma, Tamron, Tokina) 70-200mm f/2.8 for around $800. Or get a Nikon 80-200mm f/2.8 for about that price. That's not only considerably cheaper than upgrading to a D700, but with a 70-200mm lens you also get a lot more zoom reach.

I agree with the others that the Nikon 70-200mm f/2.8 is by far the best of the bunch but this is reflected in the stratospheric price. (If you have the cash, you won't regret it.)

To reduce blur, you'll also want to increase the shutter speed, so you'd split the lens' 2 stops advantage two ways: you'd lower the ISO from 1600 to 800 to reduce the graininess, and you'd simultaneously halve the shutter speed to reduce motion blur.

If you wanted to go crazy, you could even combine a D700 and a 70-200mm f/2.8 for a total of four stops advantage. And the D700 has 5 FPS, up to 8 FPS with the battery grip. How's that for a sports camera?

A final note, your D80 is capable of ISO 3200. If you keep increasing the ISO after 1600, the display will show H1, H2, and H3. These are the higher ISO settings. Nikon obfuscates this on purpose because at these values the image quality becomes craptacular. If everybody used them, Nikon would get flooded with complaints.

A better body will NOT make for sharper images...

Go with a fast 2.8 lens first, as you said, the camera has been more than adequate ... A 80~200 /2.8 (70~200 /2.8) by anyone as long as it has the Nikon AF mount.

A lens is what sees the image, the body just carries the chip. Get more light to the chip and your images will become better.

Bob - Tucson

lens first.

go with a fast ( f/2.8 ) lens in the 70-200mm or 70-300mm range. your photos will improve dramatically.

Lens.

Sport Photography is tough. A fast prime will likely help more than anything else.