Lighting is EVERYTHING! Whether you're using natural light or making your own with a softbox, lighting makes the difference between a GREAT photo, and an ok photo.
I shot the above image of my niece Chloe with my Canon G10. Several people have done a double take when I tell them that. They swear it looks like a DSLR image.
It's the lighting folks! Yes, I shot it with my Canon G10, which is capable of amazing image quality, especially at its base ISO of 80, but what makes this image is the way I lit it.
I used a collapsible Speedlight Softbox on a small lightstand with one of my Nikon SB-800's fired into it. I had the Speedlight Softbox up close and personal, about 3 to 4 feet away from Chloe.
Yes, I've worked the image a bit in Photoshop, but the lighting is what makes it, and you can't get this kind of light from on-camera flash.
Too many people get caught up in the "need" for the latest and greatest DSLR and newest, most expensive lens to put in front of it. Sure, great gear helps make a great photo, but a good photographer can make a great photo with ANY DSLR out there. I shot this with a point and shoot!
Before you go spending more money upgrading to that new Canon 7D or that Nikon D300s, or a Nikon D700 or Canon 5D MkII, consider if you'd be better off expanding your lighting gear and skills. You can get a 20"x20" Collapsible Speedlight Softbox for under $100, and a used speedlight for the same. Add some radio triggers and a lightstand, and you've got a great portable lighting set-up for less than a few hundred dollars... a WHOLE LOT LESS than that new DSLR you were looking at.
Just a thought, but I bet improving your lighting does WAY more for the quality of your images than buying a new DSLR. :-)
P.S. You can view the full resolution image over at my Flickr Page.