dSLR's most certainly aren't for cheap photographing. Be sure you're prepared to spend another thousand bucks, and yet another after that, if you're going to buy one. That's what the SLR's on a long run does to you.
20D really isn't a pro camera, that's quite cheap for that. It's the high end consumer dSLR, while the Rebel XT, or 350D if you will, is the value line.
Canon is to release a new 30D, which replaces 20D, so you might be able to find it cheap nowadays, with everyone emptying their warehouses of those before everyone wants the 30D.
Since you're not experienced with dSLR's, it could be useful to you to get some practice and feeling of the SLR world with the D350. Sooner or later the body will be replaced, while the lens accessory remains. If it's just for walking around, then you should be fine with D350, but if you even suspect you're going to need the extra quality and features that comes with 30D and 20D, then I suggest you to buy either of those two instead.
What comes to the lenses, if you wan't to get better pictures with your dSLR than with a high end consumer camera, or a pseudo SLR, then you'd better be prepared to spend some money in good lenses. It's not the body that costs, it's the lens accessory that costs.
Don't even bother with any lens under $400 USD, because only few of the "cheaper" lenses are actually good enough (better than a high end consumer camera). Especially the big lenses are expensive and the quality can be very easily told. Also the very wide lenses are expensive.
Fred Miranda's site is very useful site with user opinions and ratings of wide variety of accessories:
http://www.fredmiranda.com (or straight to the reviews:
http://www.fredmiranda.com/reviews )
If you don't want to spend much money on the lenses, then be sure to spend a good time to find out every review of a lens you'd like to buy. Google 'em out.
Since you said 100-200mm range, then I'd suggest you to look at the 70-200mm F4 lens. It's supposedly a good lens, for about $600 USD.
You'll then have to find a lens for the range below 70mm. I'm not familiar with the canon lenses, especially under 70mm, so I can't recommend anything for a low budget. However, if you wan't a cheap lens that does well, then I'd suggest Tamron 28-75mm F2.8 lens - I've bought it for my Nikon D50, paid a bit over 300 euros for the lens and goes for about same price in USD (damn imports to europe costs more, doesn't even have to translate the currency, because the actual price in N. America wouldn't be 1.25 times higher in USD).
This set should take care of your needs pretty well - just be warned: once you get an SLR, you're screwed, at least your bank account will be. You won't ever be totally happy with what you have, you'll always strive for more.

Oh, and for shooting indoors in limited space you'll need a wider lens than 28mm, preferably in the range of 12-20mm.
If you'd like to have an ultimate walk-around lens, then get a Nikon body with Nikkor AF-S 18-200mm f/3.5-5.6G IF-ED DX VR - Canon users are envying it. Unlike the Sigma's or Tamron's 18-200mm, Nikon's version has a good optical stabilizer and better quality. Of course the image quality isn't better than 70-200mm F4's, which goes for about the same price, but you won't need to worry about changing the lens and you'll have a stabilizer, which should help you out in many situations.
11.1x zoom ratio forces to make some compromises in the design, which is the reason why people are wary of lenses with a high zoom ratio (11.1x = 200mm divided by 18mm). Prime lenses will offer superior quality over zoom lenses in same price range, because those can be optimized for a certain range alone. Although the prime lenses are difficult to master!
Oh.. if you're going to buy a tripod some day, make sure you'll buy a good one. You'll find many tripods for cheap, but I suggest to stay away from those and save the money for a good one. You'll need it, if you're going to need one.
Another lovely aspect of dSLR's are the flashes and wide variety of accessories for those. The built-in flashes aren't anywhere near as good, the range is something like 5 meters, while a real flash will reach out to 20 meters and those will create softer light on a subject - No sharp return lights.
Although theres a price that comes with all the stuff added to a dSLR - in some places, crowded with people, they can look at you differently than if you'd simply wield a pocket camera. The difference is usually negative.
I had an excellent comparison of this situation in latest may day, 24th of june. I spent the day in a same place I had spent it for the last 3 or 4 years and every year I've had a camera with me, but before this time I've only had two different kinds of pocket cameras. People didn't pay much attention to me in the previous years, but when I appeared there with my D50, Tamron 28-75mm and a flash, some people were giving bad looks at me and one even came to ***** about the photographing (I hadn't even photographed them). After short discussion I told her that if shes not happy with my honesty, then I'll call the cops to tell her whos right. One person also put his hand over the lens when I was preparing to take photograph of a friend dancing - fortunately his hand didn't touch the lens itself. Also heard talk of a professional photographer, magazine photographer.. Some people will not take you as a typical john doe photographer, but they do think that a big camera is most certainly the sign of a magazine photographer or something else that might publish the photos somewhere.
Fortunately this tendency is different between cultures - unluckily for me, I live in the middle of one of the most negative cultures towards public photographing.
Originally posted by BigGun I have one...very nice camera, I think $999 is little on the high side. I think I recently saw for $799 after $100 rebate.
Guys, make sure that you're comparing the correct currencies

That's a Canadian site, which most likely uses the Canadian cheapo dollar.