If you want something more compact than a DSLR, but with full features, and that price point, also take a look at the Canon G12. It's got a little larger sensor than the SX40 and slightly less megapixels, which translates into larger photosites on the sensor. That'll give you much better detail in low light and less digital noise (grainy looking) in the pictures.
I got my wife a G11 when she basically had the same criteria. She was coming from a Canon S3 IS, which was a predecessor to the SX line I believe. The G12 has better manual control. It's really easy to shoot in aperture mode, which is how I usually use it. Most point and shoots I don't even bother b/c making the adjustment involves menu settings and stuff.
You can't go wrong with Canon's point and shoot cameras, either one will be great. I'd see if you can go somewhere and play with both of them. If you're looking for DSLR features, which for me means easy to do manual exposure adjustment, you may find that it's easier to tweak on the G12.
Canon G12 at Best Buy
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