Hi... I have the Rebel XT as well. Some people say they get great shots from the kit lens, but I upgraded to a Canon 28-105 USM and haven't used the kit lens since! I felt I got much better results from the new lens. It was about $350 I think. There was a version with image stabilization which could be useful, but it was closer to $500 and I couldn't afford it. I have done almost every photo in my gallery and website with this one & find it to be a perfect all purpose lens. (weddings indoors & out, portraits in studio & outdoors, flowers, landscapes, pets, etc) Inside sports photography I haven't done though, so maybe someone else can comment on that.
I chose this lens because it was in my price range, and I thought it would cover the most situations, since I also was limited on funds & couldn't afford multiple lenses. I feel it has done that.
For flashes, I have the 420EX (which now is replaced by the 430EX I believe) and the 580EX. I got the 580 only because I needed a back up for weddings and figured I might as well get the upgrade, but I have no complaints about the 420!! It was about $250 I think. Having an external flash helps with the indoor stuff, as well as fill flash outdoors. The on-camera flash is mostly useless in my opinion.
When I got my first SLR (the Rebel G 35mm, which is why I upgraded to the Rebel XT, they function the same & use the same lenses) I could only use it in auto too of course... I took 2 classes on www.betterphoto.com and they really taught me some basics that were crucial to my learning. By the 2nd class I was shooting in full Manual and not scared of it :) The classes are not cheap (about $300 for an 8 week course), and on-line learning isn't for everyone, but it's an option. It worked for me. I can't learn from a book, and with working full time and running a household, I didn't have time to go to school. The on-line class was a good middle ground. Plus now I have the lessons printed out in a book & still refer back to them from time to time.
Sooo, those are just my thoughts from my experience. As far as the monitor situation, you might need it to be calibrated.