Let me drop some more information on you guys - it might make this easier to understand :
I mainly shoot: landscape/outdoor shots, low light (concerts, parties), long exposures - I sold the D40 w 18-55/55-200 and got a really good return on the money I spent on that stuff - it was a no brainer for me. I had outgrown the D40 as a photographer and needed to upgrade the body. I am not one of those people that gets every body Nikon makes, nor do I envy FX shooters, the D7000 is my ideal camera and will be for several years to come. Anyway, I had major issues with my 55-200 and never took to that lens - for me to switch lenses when I wanted more reach became annoying because I felt I was dropping down in quality (the 18-55 is a great little lens, I dont care what anyone says - it takes great shots and does OK with macro). My reasoning in selling this bundle and picking up the 18-105 + 35 1.8 is pretty simple - I wanted a zoom lens that was halfway decent and also a sharp prime lens. The MTF charts on the 18-105 are better than the 18-55 and it has gotten some great reviews. I can have one lens on my camera and do pretty much everything I could with my 18-55 55-200. I rarely shot anything at 200mm because the flare was so bad.
The 50 1.8 isnt practical for me, its too much with the DX body - I will use the 35 much more.
Thanks everyone for the great input.
I edited out the parts where I berated adamz - thanks taotejared!
