I bought a Canon T1i a couple of weeks ago, and absolutely love it. I think it’s a good upgrade from the XSi, but you can’t really go wrong with either camera.
The video quality is superb. You do need to learn how to manually focus while shooting, because auto-focus doesn’t work. But the quality is stunning - on part with high quality semi-pro HD camcorders, in my opinion. The ability to shoot video through the various high quality lenses that are available is quite valuable. There are even companies making video rigs that the camera will mount to, which then give you support for steadicams, follow focus dials, etc. There are professionals shooting commercials and music videos with these cameras.
Aside from video mode, you get higher resolution, which I think is a mixed bag. I’m not sure the added resolution brings that much value other than the ability to crop a little more.
Another big feature on the T1i is that it gets the 960,000 pixel 3" LCD from the higher end line, whereas the XSi has a 230,000 pixel display. This means you can actually see enough detail in your photos when reviewing them to be able to spot focus problems and other issues.
In addition, it’s got the faster processor from the higher-end cameras and a better auto-focus system. It also has sensitivity up to 12800 ISO, a Creative Auto mode inherited from the high-end cameras (quite useful, actually), and peripheral illumination correction.
Overall, I think it’s well worth the $200 premium, but that said, any of the DSLRs are capable of amazing pictures, limited more my the skill of the photographer than the limitations of the camera. I don’t think you can go wrong with any of them.
If I didn’t want the video mode, I think I’d be looking for sales on the XSi. At retail, I think the T1i is a better value. But I’ll bet the XSi will be available at a discount if you look.