you are kind of comparing apples to oranges here......I think the d60 is more comparable to the XS.
To me, the d40 seemed like a TOY. Its also based on technology that is a few years old, vs the XS which came out in 2008.
I found this review page for the XS...it seems pretty decent for the entry level canon. This camera apparently has "live view" which means that you can see what you are composing on your viewfinder BEFORE you take the picture.....Most digital SLRs do not have this feature. That being said however, when you are out in the field, these screens are not easy to view in bright light....the screen is a bit small...
This camera does have a full range of settings for you to be able to use it in either automatic mode, or fully manual mode, PLUS it has 7 focus points...not too bad for an entry level camera.
The lens that comes with the camera is entry level, but still has image stabilization built into it. The camera also has a good range of being able to adjust the sensitivity of the sensor to make it good for low light shots....and the quality looks pretty good
http://www.digitalcamerareview.com/default.asp?newsID=3758&review=canon+rebel+xs
The nikon d40 camera has substantially less megapixels (personally i wouldn't get anything less than 10 in this day and age, ONLY 3
autofocus points, which is less than half of the canon xs, and ALSO,
although the lens that comes with the camera for either the XS or the d40 isn't the top of the line model, the canon XS lens has what
canon calls image stabilization...which makes it easier to hand hold the camera. The Nikon d40 comes with a similar lens, BUT the lens that comes with the d40 does NOT have nikon's equilavalent of image stabilization , called VR..
For an extra $100, the bigger megapixels, more autofocus points, and the image stabilized lens is WELL worth it !!! Go with the XS
Oh yeah, I forgot to mention. The d40 does NOT have the Live view feature either. personally I think that looking through th viewfinder is better, but some people do like to compose using the screen.
There is ONE thing you should be aware of here as well, and that is there are TWO types of digital SLRS...Most of them
are called "cropped sensor cameras", and the really expensive $3000 cameras are FULL frame cameras.
With canon, the EF-s style of lenses used on the cropped sensor camera can NOT be used on a full frame model.
With nikon, their cropped DX style lenses CAN be used on a full frame camera...however, the cheapest full frame camera
right now costs $4500.
If you go with the XS, just be aware that if at some point in time you decide to get other lenses for it, make sure to buy
lenses that are called EF, full frame lenses. That way, if in a few years you want to go to a full framed camera, you can bring the lenses with you.