One other slightly less expensive option to consider might be the Canon 60D. It has the same sensor as the Canon 7D, and most of the same features & capabilities as the Canon 7D. At $900 for the Canon 60D vs. $1600 for the Canon 7D, it's probably the performance value bargain in the lineup. I have both the Canon 60D & the Canon 7D, and don't notice much difference between the 2 in practical use. One significant advantage that the Canon 7D has over the Canon 60D is the ability to perform AF micro adjustment, which can be useful if some of your lenses and body are at opposite ends of the tolerance spectrum.
Given your stated use, I also recommend sticking with an APS-C sensor for the moment, as the 1.6x crop factor will give you the extra telephoto reach over full frame that will be useful for sporting events where the subject might not be that close, and an APS-C body is also lighter than a full frame body. If you can afford to hold onto your old Canon 40D body, that is something worth considering, as you can mount whichever lens you are less likely to use for a particular situation on your old body, so you can switch back & forth between bodies without having to swap lenses in dynamically changing shooting conditions. It also serves as a backup in the event you need to send one or other body in for service or cleaning.
The Canon 60D will still offer several useful upgrades over your older 40D e.g. almost double the resolution (useful for cropping), 2 stops better light sensitivity, better AF, much higher resoultion flip-out screen useful for evaluating photos, video capability etc. This chart breaks down some of the differences:http://snapsort.com/compare/Canon_EOS_40D-vs-Canon_EOS_60D
One other lens you might want to consider is a 50mm prime lens. On a 1.6x crop factor APS-C body, a 50mm lens works out to be equivalent to an 80mm lens on full frame, which is a focal length that works well for portraits. With the wide aperture that usually accompanies prime lenses, when shot wide open you should be able to get some nice creamy portraits with good bokeh. Canon's 50mm f/1.8 is pretty plasticky as far as build quality goes, but is inexpensive & provides good results. Canon's 50mm f/1.4 & Sigma's 50mm f/1.4 are also good & better built than Canon's 50mm f/1.8, but are quite a bit more expensive, so you may want to buy the Canon's 50mm f/1.8 first to see if the focal length works for you & is something that you would actually use.
But, honestly, the thing that is likely to allow your photos to improve the most is getting to know the features & capabilities of either your old and/or new camera better. The sooner you can move from full auto to shutter priority and/or aperture priority and/or full manual mode, the sooner you are likely to be able to capture the photos with the look & feel that you want. Different people learn differently, so you need to figure out what combination of methods works best for you. Examples are: just experimenting, reading online forums, reading magazines, watching video tutorials, participating in local photo workshops etc. Finding the time can be a challenge if you have kids, but the results should prove worthwhile, and understanding the basic concepts & operation is something that you only have to do once.