I am all ear if you can get me working well with my 40d that be fantastic
I'm as guilty as the next person of wanting an upgrade. I'd love a 7D for sport and a 5D mk2 for studio work, plus the video opportunities, but I get by OK with my 50D.
As Dirty Harry would say "A man's gotta know his limitations", you just need to work within the parameters of the kit you have.
I upgraded to my 50D because my 40D broke it's shutter, but also because it gave me 1 stop better ISO performance and higher Mp so I could crop harder for sport. It meant I could shoot slightly wider, catching the action as I knew I could crop more.
I never had an issue with it in portrait situations because I never went above ISO 400 really. It really is all about the light and once you start playing it gets very interesting.
Simple stuff is on camera flash, bounced or diffused. I got a Gary Fong lightsphere to kill the harsh shadows from flash which helps but any indirect way of lighting would be good.
Off camera flash is good, but then you're into a ST-E2 trigger - limited range though - or the 7D has built in flash wireless trigger. Extra lighting sources help also, so a second flash gun, natural light or bounced light from a reflector, or shoot in the garden.
I don't use it much but I have a 50mm f1.4, which sometimes proves invaluable for the extra stops over f2.8. You just need to watch the depth of field, but I got mine for around £220 and it's small and light enough to always be in my bag.
Aquick example of a 40D shot. Handheld with my 24-105 lens 1/15s f/5.6 at 32.0mm iso3200
At 30" x 20" print it's got some noise in the dark areas (but then that's arty - honest

, but it's not bad.