Go to any photo sharing site and search for "D40" or "E420" to see representative images. Both lenses have an equivalent zoom and focus range. Relating the lens to a 35mm film frame, the D40 has a multiplier factor of 1.5, the E420 has a multiplier factor of 2.0. Thus, the two lenses you describe have the same coverage.
Neither lens is a macro lens. The kit D40 lens can focus to 11" (as measured from the sensor plane) at all zoom settings. It does well with closeup shots. The 18-55 lens is fairly good quality. I find that this lens works well for bug and flower shots.
The 14-42mm E420 lens close focuses to 10", but I don't know if this is true for all zoom settings. You need to try this out at a store. If you want narrow depth of field for artsy shots, this lens won't cut it.
Depending on where you want to go with photography, the Nikon system will give you a larger selection of lenses, including lenses going back many decades if you don't mind shooting manual. I use a 500mm lens made back in the 1980s on my D40.
The E420 has a slightly smaller sensor which will make a difference in lower light situations. In well lit situations, you won't see any difference.
E420 may have better exposure control than the D40. The D40 exposure sucks in auto mode most of the time - which is why I shoot in program mode on the D40, usually with -0.7 exposure compensation.
For general photography, either camera will work. The megapixel difference isn't a good reason to choose one over the other unless you like to heavily crop or like to make large prints. The E420 has more features. This may be important if the camera will be used by people with little knowledge of photography. If you don't like viewfinders, the E420 has live view.