Canon Digital Rebel XTi 10.1MP SLR w/18-55mm  or

olympus E-500 8 MP with two Lenses:
14-45mm f3.5/5.6 Zuiko Digital Zoom Lens
40-150mm f3.5/4.5 Zuiko Digital Zoom Lens


the olympus claims Spotless Pictures with an exclusive dust-free filter system prevents debris from settling on the image sensor to literally stop anything from getting in the way of your capturing exceptional pictures?

my sister in law had the E 500 seemed pretty nice.

What do you guys think they are both around 700-800 bucks at compusa

If I had to choose, I'd go with the Canon. HEre theres more stores that carry the Canon line (camera stores, not electronics stores like Compusa). Olympus makes good cameras (at least their 35mm was good quality. Their DSLR more than likely is also). Handle both. See which one you find to be more comfy to handle.

I've had my D70 since april 04 and still dont have a dust on the CCD problem.

Dont get too caught up in the MP battle. One of our local photographers uses a 6.1MP D70 to do billboards.

Unless there is some specific reason or need to do otherwise, I would stick with Canon or Nikon.  They are the market leaders and have great lens selection and a wide user base.  

So, in your case, I would say Canon.

Also, check out dpreview.com and steve's digicams for reviews.

Go with the Canon.  When you buy a DSLR, you're buying into a system of lenses, and Canon and Nikon have the best glass.

Thanks
Just ordered the Canon!

My father-in-law has 5 or 6 nice Zukio lenses for Olympus, ranging from macro and wide angle, to portrait and zoom, so in his position he would be silly to not put the E-500 on the top of his list.

I think you made the right choice since you are not likely in his position.