The 40D at ISO 1600 is not bad, here is a image from several years ago at 1600. I preferred to stay at 800 or less, but with the newer editing software, ISO 1600 should be fine.
You can denoise anything, but of course sharpness goes down the drain. Having said that, your iso1600 sample doesn't look too bad - maybe it's just like a previous poster wrote and the newer 18mp sensor just offers added megapixels as a tradeoff for more noise, and 18mp scaled down to 10mp is equal. I'd like to know how the noise of newer sensors really compares to older ones - but no use posting live pictures for that, I'd have to be a real measurement.