D90 standard kit that includes 18-105 VR is currently probably the best value for the money you could get for 1200$.
If you have more to spend and you are new to DSLR then D90 body for 950$ + 18-200 VR for 650$ could be a very good choice.
Above that? Please tell us what are you interested for in photography so we could think of something appropriate.

"gentoo - if the price is not an issue I'll go for 300/2.8"

True (although I'd opt for the 200-400F4). I don't think that line was in interest here though

gentoo - if the price is not an issue I'll go for 300/2.8 :D

I keep forgetting a few ounces or grams of weight mean a lot to most people lol. The weight difference is vitually unnoticeable to me.

Because I shoot a lot of wildlife, I saw a bigger difference in IQ between these two lenses. Doing normal stuff it's probably not that noticeable.

The only thing I would have to agree with is that the 70-300 does have a beefier VR system. My D40 didn't really like this lens as much as it did that 55-200 which I sold with the D40.

All I am saying is that if price is not an issue (hence my if you can afford it remark lol), then go for the 70-300. At 200mm is way sharper than the 55-200 as that lens is at it's very limit and IQ falls off sharply.

and the 55-200 is SO MUCH lighter!!

I love the 70-300 VR as well, but it eats my battery life (VR is more stout I think) and pictures are only marginally better than the 55-200. . .IMO. . .

gentoo - indeed 70-300 vr is a better lens than 55-200 vr but comparing prices the second one is a winner (as it cost almost half the price of the first one)

I'm going to break my streak on agreeing with willis and adamz and say that I wouldn't say the 55-200 is all that great. It seeems on par with the 18-200. If you can afford it, I'd go for the 70-300VR. For a consumer telephoto in this range it's a great lens. Not really for my needs but for normal people it's awesome.

In Your case I'll go for d5000, if You are new to photography it will give You a lot to work on, and the ability to rotate the screen gives a lot when You take pictures on the ground level, as for the lenses in Your case I'll go for the 18-55VR+55-200VR as it delivers better (or at least not worser) IQ than 18-200, You can also consider Tamron 28-75/2.8 as for it's price it's a true bargain (around $400).

Personally, I wouldn't bother on the low end. As Nikon's starter lenses go you've got the

18-55 - $100 - Wide to normal zoom with excellent image quality
18-55 VR - $184 - Same as above with vibration reduction
55-200 VR - $219 - Mid range - telephoto zoom for when you need a little more reach
50mm f1.8 - $100 - Supersharp prime -> won't auto-focus on the D5000 - Good for portraits (AFS version will probably come out soon).
35mm f1.8 - $200 - Supersharp prime - Will autofocus on the D5000, Roughly equivelent to what your eye sees in terms of zoom

These are all excellent, and all the lens you will ever need. These are so cheap that the third part lenses can't get much cheaper. You'd only save $20-$50 per lens on a good day. If you don't want to carry around more than one lens, just grab an 18-200 ($600-$800). It's a little less sharp but very versatile.

Once you get to the higher end or specialty lenses, there are some good deals to be had on the third party lenses. I don't think they are worth looking at if the price difference is less than a day's wages.

@Willis....ha, no photography career in the plans :)

Should i focus on Nikon lenses specially? Are the sigma and other brands worth looking at as well?

I was going to say D3000 until I saw you had a baby on the way. You will definitely want some video of the little guy. No still camera can capture just how funny it is watching babies try to walk.

D90 vs. the D5000? I prefer the D90 as a photographers camera. Its much easier to mess with the settings and what have you. If your going to leave it in full Auto all the time, and only use newer Nikon lenses (including all the kits). Save yourself some money and go with the D5000. Your going to be taking lots of floor level shots so you might even appreciate the adjustable screen.

For creating art, or any sort of professional work, the D90 is a much more sensible choice. But please... don't try to launch a photography career with your first new-born. The little bugger will want to go to college some day LOL. Both are excellent cameras. You should only pay the D90 premium if you think you might use one of its features.

If you want to get as much as possible for your money, buy the cheapest body you can find and invest in lenses. Lenses will keep their value. Anyway, great pics are made mostly by the lenses used.

If you need video, go with D5000 it's close enough to the D90.

If you don't "need" the video, you should get even a smaller body, (D40x, D60 if you can still find them, or the coming D3000 if you can wait for its release) and keep the money for the lenses.

For portrait you might want a 50mm ƒ/1.8, it's a cheap lens yet on DX it offers a nice 75mm focal length that works well for portraits. The big aperture is also important.

For holidays/birthdays if you are planning to do indoors shot, the 35mm ƒ/1.8 would also be a nice addition.

I'm not really into the DX zooms, but there's always the 16-85 and 18-200 that are more versatile than primes. Their smaller aperture makes them less attractive for portraits and indoor tho.

An ideal and versatile kit to me for DX would be something like nikkor 10-24 for landscape, the 35mm ƒ/1.8 for just about anything, the 50mm ƒ/1.8 and a 70-200 ƒ/2.8 for portraits and more.

I'm going to say D90 as most know already. For the difference in price the D90 is a better bang for the buck. Also, if you think you're really going to get into photography, why buy one camera only to sell it at a loss then buy another later? I've done that myself. The D90 is a camera you can learn and grow with and will most likely satisfy you for some years to come before you feel like you need to upgrade. You can use some older AF-D lenses as it has a motor drive which the D5000 lacks.

As far as kits go, this depends on how you will shoot for the most part. Sense your just starting out, I've go for the 18-200 lens until you see where you like to shoot most as that lens covers a wide range.

So in the next few months I will be making the move from Point and Shoot to a DSLR and am having some trouble deciding on what i should get. I love taking photos, i am always designated the family photographer at any event, so I know whatever I get will definitely be used...ALOT!

I am pretty certain I have narrowed it down to either D5000 or the D90, the D90 being the one I am leaning towards. I just dont know which way to go as far as kits or other lenses and accessories. The main reason I am looking to upgrade is we are expecting our first baby in February and with our families hours away, I want to be able to share some great photos with them. So the first uses will be some everyday photos mixed with some maternity portraits of my wife leading into photos and portraits of the baby. I would definitely like to work towards get a good setup at home for some portraits for holidays, birthdays, etc.

Just looking for some ideas on where to start and how I can progress to be a small setup at home...thanks and sorry if this has been touched on many times before, but I know everyone has a different reason of moving into DSLR