[JKratty]

+1 to something like the d40. it will give you plenty of room to grow as you get more experience with it.

But remember, what gear you use plays only a small part in the quality of the images you produce. Most of the magic happens behind the eyepiece, i.e. from your eyeball through your brain. Stepping up to a dSLR will allow you to learn depth of field, among other things, which will then allow you to become more artistic. At that point, you're only limited by your own creativity. Develop your "eye," then look to upgrade your gear.

[b]slim[b] -- in a compact p&s, no matter what you're going to be limited in the reach of the lens. Most cameras tout specs like "4x optical, 40x digital zoom!" If all you care about is posting pics on the web, then maybe that will work. But from my experience, digital zoom is junk. Optical zoom actually is a measure of the reach of the glass in the camera. Obviously, in a tiny little p&s, you can't fit much glass in there, hence the need for the processor to invent what it sees beyond the reach of the actual camera.

I know dSLRs can be bulky, but there really is no substitute.

Just my $0.02. Most importantly, have fun!