For good hobbyist digital photography you need to budget for 5 basic needs: a camera, a telephoto with macro function (for critters far and small), a tripod, a camera bag and photo editing software.  This doesn't include UV filters (c. £12) for the lenses - which you would be mad not to buy (they cut down on haze and glare affecting your image but more importantly, they protect your expensive lenses).

Which Camera?

If you feel completely lost in the world of digital SLRs and their myriad lenses, you could opt for a superzoom compact.  I had a Panazonic FZ-10 for 3 years before getting my Canon 350D D-SLR. It has one built-in lens that cannot be replaced like a D-SLR system. But the zoom goes from 35mm to 420mm (12x zoom), which was superb for wildlife.  It also had a great macro mode for small close-up work on insects. You cannot switch lenses but you can screw 'adapter' lenses onto the front, e.g. close-up, telephoto and wide-angle adapters (each possible to obtain for under £100). I have a Nikon T5 close-up (eBay £30) and 1.4x tele-adapter that extends the camera's range to 18x zoom (eBay £50). Camera's like this tend to be cheaper than D-SLRs and already have a very flexible lens out-of-the-box. Crucially, many are fully programmable, like D-SLRs allowing you to learn the basics of exposure, aperture, white balance, bracketing, flash compensation etc.  The FZ-50 (£329 @ Expansys) is worth a look as it has a fantastic lens made in partnership with Leica, the world's best lens company.  The new 18x Olympus SP-550 is also well rated (£310 @ Amazon - check reviews for picture quality).  There are some links to good review sites on my website: Photography\My Kit page.  Ignore 'digital zoom' figures as this is just blowing up an area of the photo; not a true 'optical' zoom.  Only pick a compact that can shoot in the .RAW  file format (not just jpeg) Its not important to begin with but RAW capture and the greater degree of post-processing work it allows will be something you may wish to grow into.

One thing compacts all do that D-SLRs do not do is offer a 'live' view on the rear screen.   With a D-SLR you are actually looking through the lens itself rather than a small window above or next to it, as on old film compacts.  D-SLR and film-SLR cameras use a mirror or prism to transmit the lens view to the eyepiece, rather than the image sensor/film. So the camera itself cannot 'see' what's in front of it until you press the shutter; the mirror flips up exposing the film or image sensor to the view through the lens, hence the lack of a live view on the rear screen.  You can see the photo after you've taken it on a D-SLR but cannot use the big rear screen to compose the shot, only the eye piece.  The plus side of this is a huge saving in battery power as big bright 2"-3" LCDs use up a lot of power.  The eye piece in a lot of digital compacts is actually a tiny LCD, a further power drain.   The upside of live viewing, particulalry with camera that have hinged rear screens, is easier composition in tight places.  Its much easier to compose a ground level shot of fungi if you can swivel the rear screen up.  With most SLR cameras you would have to get your head on the ground and squint through the eyepiece.  There are recent D-SLR exceptions to this.  The Olympus E-330 has a live view due to some clever gimmickry, though image quality is supposed to be less satisfactory than its Canon and Nikon budget rivals.  The Panasonic L1 and Leica Digilux 3 (practically the same camera under different branding) both have live viewing but are very expensive for the hobbyist.

If you insist on going straight to a D-SLR then the Canon 400D, Nikon D40, Sony alpha-100 or Konica KD100 are all very good choices.  Things to bear in mind with D-SLRs are:

Handling

How does it feel in your hands? Can your fingers reach the shutter and other buttons easily (without having to take it away from your face, thereby losing the composition)? Does it feel robust, like it could take a few knocks without the case splitting? Do the battery/memory card flaps feel secure and have strong hinges?  You don't want either to pop open whilst you are dangling over a ship's rail to snap the Statue of Liberty.

Battery life

Generally much better than compacts (2-3 days of care-free shooting rather than 1 day of careful, energy conscious shooting).  Consider a buying a second battery if going abroad (pack the charger if away in the UK!).  If you do go for a digital compact, turn of the continuous autofocus and continuous anti-shake features.  No point in the camera doing these things whilst dangling at your side.  Use the large rear screen as liitle as possible, you'll get steadier images by using the eyepiece anyway.

Start up time

Another important consideration for wildlife - no good seeing a critter doing something rare/funny/illegal if your camera takes 4 seconds to start up.  D-SLRs tend to be quick; my FZ-10 compact took 4s vs my 350D's <1s.

Resolution

Megapixel spiel is like the processor MegaHertz propaganda you had with PC sales.  A bigger number is not always best.  The problem is in the size of the image sensor, budget D-SLRs (i.e. <£700) use quite a small sensor chip and the more light sensors you cram on to it the more they interfere with each other causing 'noise' - random specks of colour in the photo.  Too few megapixels and your images will look pixellated (i.e. blocky) when printed at A4 or larger.  The same applies to cropping/trimming an image (i.e. only using a smaller area within the photo and deleting the rest - effectively 'digital zoom').  I often crop photos to improve the composition.  5 MP is generally held to be good enough for A4 prints, 8 MP for A3 (though this doesn't account for cropping the picture before printing).  I had fine results with my old 4MP FZ-10, and the 8MP 350D is faultless at A4, even after a bit of cropping.  The 400D is 10MP and the reviews say it suffer very little from noise problems, and that picture quality is excellent.  The 350D was the World's best selling D-SLR and the 400D will probably succeed it.

Image Stabilisation (IS) technology

Sounds gimmicky but its actually very useful for wildlife and any other area where the action tends to be quick and the light levels low (low light = slow exposure time = blurred picture as the subject moves during exposure).  It goes by different names for different cameras (e.g. Image Stabilisation, Vibration Reduction, Super Sure Shot). It works by automatically moving the image sensor or the lens to counteract your hand tremors (handy after a night out on the pop).  It means that you can get away with not using a tripod a bit more.  Definitely worth considering as a feature.  Unfortunately, Canon opted for the lens stabilisation approach.  Sony went for the sensor stabilisation in their Alpha-100.  So if unless you pay £100 extra for each new lens for your 400D it won't have IS.  WIth the Alpha-100 every lens you add on will be stabilised because the IS technology is in the camera body not the lenses.  The FZ-10 was the first camera to use IS and I miss it in my 350D. But then I take a tripod on every photo trip anyway - but its more faffing about.

Continuous shooting rate

The number of frames a camera can take - usually 3/s for budget D-SLRs.  Could be important for wildlife when you want to capture an action (animal jumping or an facial expression) and want to keep shooting to capture the perfect moment.  Some cameras can keep going at 3-4/s until the memory card is full, others tail off after 10 shots or so.  It depends on the memory buffer of the camera.  Canon's are quite good at this - compacts less so.

Buying into a 'system'

You need to choose wisely if you are in it for the long term.  Canon lenses won't fit a Nikon, Olympus, or any other D-SLR and vice versa.  So once you've bought a few lenses over the years you are then stuck with the same manufacturer for future cameras - unless you are happy to eBay the lot and lose a lot of money on their resale value.  You can't really go wrong with Canon or Nikon as systems to buy into to.  Canon has the largest number of compatible lenses but Nikon is not far behind.  The latest Olympus and Pentax D-SLRs use the new Four Thirds system of lenses which are fewer in number and less commomly produced by 3rd party lens maker (Tamrom, Sigma and Nikkor).

See my advice on choosing lenses for your camera