Upgrade from 40D or upgrading lenses

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The 40D is a great camera. I've had one for a few years and take mainly wildlife portrait shots with it. With decent lenses (I have 100mm macro (non-L) and 400mm f5.6) and some PP I am generally very pleased with what I can get from this camera.

Some examples: http://www.flickr.com/photos/63512568@N06/sets/72157627293307584/

I agree with others who say upgrade glass first. That said I'll also be looking to upgrade from the 40D next year, either to the new 70D/7DmkII offering or possibly the 5dmkIII.

Lense-wise I highly recommend Canon's 100mm macros and the 400 f5.6. I also seem to have a very sharp copy of the 70-300 non-L and love this lens too - very good value for money.
 
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As someone who went from the 40D to the 7D I would say it definitely was a worthwhile upgrade. Although noise levels even at moderately high ISO settings are considerably high, I quite like the overall image quality of the 7D – better than the already good 40D. Resolution, AF, speed and ergonomics are far better in the 7D. But if you are after a camera with superb image quality especially in low light/high ISO situations, you'd probably be better off with a 5DII.
 
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I think the 40D is one of the best crop cameras Canon has made. I've sold and repurchased several of them as friends and family wanted a good DSLR without spending a lot of $$. I finally replaced my last 40D with a 60D (same sensor as the 7D). Meh. 60D is fine, faster fps, etc but I'd take another 40D in a heartbeat. I also agree, stay away from the 50D. Increased pixel density was a mistake.

My suggestion - UPGRADE GLASS with good EF or L lenses. KEEP 40D unless you need better focusing.
 
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