We've had a D40 for approaching a year and a half, and overall I'm pretty happy with it. It does have a few major flaws, most notably an all too often inability to achieve focus or, in Auto mode, to decide which of the three focus sensors to use, both of which prevent you from snapping any picture with Auto's default settings. I don't like spending money to miss pictures.
Beyond the flaws, there are issues that I realize are neurotic peeves. I have FE2 and N70 film bodies, and a few manual (80-200mm f/4) and AF lenses (35-70mm f/3.3-4.5 and 50mm f/1.8) to go with 'em, as well as an old SB-20 Speedlight. Nikon, usually religious about backwards compatibility, has cut pretty much every bit of that compatibility out of the D40 short of the F-mount and flash hotshoe. I don't get AF from my old AF lens because there's no internal focusing motor in the D40, which makes focusing wide open at f/1.8 on the 50mm a challenge. I don't get Aperture Indexing (AI) on my 80-200 zoom because the D40 doesn't have the mechanical stop to read the dial. Both of those omissions admittedly make some sense, as they'd require significant physical additions and cost to the camera body, but the thing doesn't even have the circuitry to do TTL with the SB-20 -- nor can it ask the SB-20 to turn on the infrared focus-assist light. If using the assist light is as easy to integrate as it seems it'd be, leaving the ability for the D40 to use it out is plain dumb.
These things annoy me because they greatly limit my access to used Nikon equipment -- equipment I own and equipment I might scarf up off of ebay. Old AF lenses, flashes, much less manual focus lenses, are pretty much huge pains to use on the D40. The D40 will still run the shutter the way you ask, but you're going to be on the Manual setting and eyeballing everything. Swapping the built-in flash from TTL to manual (and from 100% to, say, 50% power), is a real hassle, effectively overcome only by adding the old Speedlight on top and ignoring the built-in flash.
I've since come around a little on the lack of backwards compatibility. The D40 is dirt cheap -- $470 for body and lens -- and the new DX format means that it's not like it'd be smart to use an old fisheye, even if AI worked. What used to be 20mm on the film Nikons works out to about 30mm on the D40, no longer seriously wide angle. For wide angle stuff, you're going to have to replace your lenses with something specifically made for the smaller DX sensor which takes advantage of the narrower view by using less glass and saving some you some cash in the process. What's a DX 10-20mm in full 35mm film numbers? 6.7-14mm? Try buying one of those. The old < 10mm lenses are wacky enough already.
Add to that that the truly long, fairly fast telephoto AF Nikon lenses have had internal motors since about 2000, which I knew, but didn't really take the time to realize what it meant: These work on the D40 too, which is pretty cool. The 300mm internal motor AF lenses are still pretty expensive, but it's a bigger field for finding used lenses than I'd thought I'd have when I first considered the D40.
(I realize talking about a $1200 lens on a D40 sounds idiotic, but do remember that every year you can hold out on the camera body is another set of fancy smancy features you can bag once you do buy. Lenses, speaking with only a hint of hyperbole, last forever. Bodies are replaceable. Do you really shoot at full res with your D300 right now if you're not on the job?)
So about the only lens I'm really missing out buying thanks to the D40s cut corners is the cheap 70-300mm Nikkor zooms. People love them, but the digital version is hundreds of dollars more. f/5.6 at 300 is getting close to slow, too. Not being able to use this lens is not as big a deal as I'd made it out to be a year and a half ago.
Still, I've wanted to try out a 300mm lens for nature photography and some sports, and wanted it at least as fast as my 80-200 f/4 that I use now. Even the 300mm Nikkor from 2000 that focuses on the D40 is insanely expensive for playing around. Luckily the D40 provides a neat loophole for getting an extremely inexpensive 300mm telephoto -- it's the first Nikon since the 60s, I believe, that'll attach to pre-AI lenses without getting damaged.
That puts a lot of lenses back into play that, just as importantly, don't have as much competition/demand on the ebay market as the other manual focus lenses. Putting a pre-AI lens on your 1977+ Nikon that's not a D40 or D60 will damage your camera without some work that Rockwell describes as a hatchet-job, if only because your lens is no longer close to collectable and, well, does look a little rough afterwards. Now the guy with the "hatchet" pretty clearly knows his stuff, and short of the now-defunct conversion service from Nikon is about your only choice for getting pre-AI on any other Nikon body. And the "hatchet" starts at $25+$6 shipping = $31 surcharge. That's $31 extra bucks plus shipping up to Mr. White's workshop that I can bid with that most others can't.
Long story only slightly shorter, so I grabbed a pre-AI 300mm Nikkor for under $50 shipped. It's about a half-stop slower than f/4 (opening up only to 4.5), and won't focus any closer than about 13', but for several orders of magnitude less than my other choices for an f/4.5 or faster 300mm Nikkor, I'm game. It works well, so far. It also makes me feel a little better about the D40. A little.
Update 4/6: More links on the old 300mm. Seems to have something of a bad rep among aficionados, but not knowing better, I'm not sweating the lack of perfect sharpness. And for under $50 shipped (with one waiting in an eBay store for $75 shipped, willing to take less), the price of entry is next to nuttin. Nice having f/4.5 vs. 5.6, though I'd take 4 or 2.8. ;^)