Hey I got my first DSLR for the same reason. KIDS. My first DSLR I purchased when my first born was born. It was the original Canon digital rebel. It still takes great photos even over 6 years later. It has had a couple annoyances come up (doesn't remember date/time anymore and the eject button for the CF cards broke) and it definately has trouble focusing since the technology is so old in that camera. Whatever DSLR you choose you'll get many years of happy photos. I tell people that you'll get many more years out of a DSLR than you would out of 2 or 3 point and shoot cameras just because they are built so much faster.
Now with that being said before you go out and purchase the XSi make sure you look at the T1i and make darn sure that you don't want the movie feature. Another thing to look at with the T1i is it has the latest image processing engine in it (it has the same engine as my 50D). With each processor they get better at reducing noise, improving focus performance etc... Plus the price difference is about $150 dollars. I know it seems like a lot but if you get 6 to 8 years out of that camera it will be worth it to make the step up to the latest technology.
Here are a couple photos I took with my 50D. (Note I am by far not a photographer. All these photos are because the camera is that good.)
These were taken with the 18-135 zoom. I hand held these photos no tripod. No flash.
Here is an example of the 'nifty fifty' lens. You'll see how the background is blurred out. That is from an F/1.8 setting. The lower the F number the more blurred out the background. This is with no flash, indoors, and at night. (Oh and this was taken before I got the D50 with the original digital rebel. Still takes awesome photos.)