Very, Very Good

Wanted Nikon's 18-200 VR lens and the D-40x was the lowest priced Nikon that still had 10MP. It does a very nice job! A little small for my hand but then it fits in a smaller camera bag. I use the big lens and actually hold it instead of the camera body. Have never used kit lens, can't commen on it's quality. I generally use the "No Flash" setting since it takes good pictures without the flash popping up all the time.
If I want something really sharp I switch to Program mode set at 100 ISO and unless the light is very good something to set the camera on. VR does not work as well as some reviewers claim.
Build quality appears good, SD card door likes to pop open but card has never come out, door is flimsy so I worry about it's long term durability, and battery door is chintzier than my Panasonic DMC-FZ50 but the Nikons photos are much better under low light situations.
Focus is fast and reasonably reliable, even at low light. Clouds or water can give it problems simply because there are no sharp edges for it to see.
Very versatile camera. A few things I don't like but if I read the manual more I might find answers.
Setting flashoutput can be a hassle. If anything it tends to be too powerful on closeup shots.
Time delay shots it seems that you have to set it up for each picture. Won't stay in time delay mode.
Battery life is reasonable. First rechargeble battery that didn't require a spare for even a days shooting. I can get about 400 pics even with reviewing each one. Once it stops shooting though there are no grace shots, turning it off and letting it rest for a while usually won't eke out even one more shot. Dead is dead it seems.
Overall I can't say it's better than a Canon 400D but I can say I really like it and the price was competitive even at Circuit City.