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You could always opt for a used Canon G series... best of both worlds. It's more like a digital rangefinder. An absolutely amazing pocket digital camera. I can tell you this, your D40 was essentially a point and shoot with an interchangeable lens. Nikon's point and shoots leave A LOT to be desired as well... I'd rather get a Sony.
Check out the Sony NEX.
That sounds like a decent move. I have to believe that the D40 will still get you faster and more reliable focusing than point and shoot of equivalent price of your craigslist 55-200 vr in addition to faster shutter response.
Amazingly small, considering it's packing an APS sensor -"Sir, would you like a sensor on the back of that lens?"
Man, I was playing around with this at B&H a couple SUndays ago...I was mightily tempted, they had a package deal for 499. A lady customer had one around her neck and said it was an excellent performer, does almost everything her fancy SLR does, she claimed she was a professional photographer, from Australia ... So I asked her if it was better than a Pen... she claimed the Pen is in a class above.
Hey! Hmmm.... than she should have bought the Pen instead of the NEX than. Take care,Buddy
Buddy, I immediately thought of the song "Love the one your with" after reading your post. use that NEX with all of your might! have fun.
How is the D40 a point and shoot? There's not much I miss on it, and it's certainly more advanced than my old film slr. How badly do you need the telephoto? I don't care for the image quality of the 55-200, particularly in poor light and hardly ever use it any more. Even with the 6mp D40, you can do a fair bit of cropping with its images. On the other hand, it doesn't hurt to have a pocket sized point and shoot handy. The best of both worlds might be to keep the D40 for use with a bounced flash and shots that are a bit more timing sensitive and have a nice little point and shoot for good light.