In terms of IQ the 7D does improve over the 40D and 50D but it is not a night and day transformation. The night and day transformation is in the AF, which I find to pretty much be the equal of my 1D3 for BIF with my 100-400.
Of course, the 7D throws in a few additional features of potential benefit, including faster FPS and the 100% viewfinder. Then there's the inclusion of wireless off camera flash control, video and a few other neat touches like the built in level, temporary override of AI-Servo to One-Shot and vice versa, an extra stop either way of EC and FEC and better battery data.
They're all good cameras and I do think you get what you pay for. At £1700 the 7D was silly money, but now at around the £1200 mark it offers very fair value, if you can afford it and can make use of the features. If you'd rather spend less then the 40D and 50D are very capable as well, within their class. All of them should be a nice upgrade over a 400D from several viewpoints - AF, viewfinder, FPS, build, battery, ergonomics. The 7D just goes further in each of those departments and throws some more in for good measure.
I do have a 30D, 40D, 50D, 7D, 5D2 and 1D3 so I do feel qualified to offer an opinion. You might also check out the 7D vs 1D3 thread as well. That should tell you how good the 7D is. The URL for the 7D AI-Servo album has changed as follows....
http://picasaweb.google.com/EezyTiger/7DAIServo?authkey=Gv1sRgCKfYg_qhrPzzdw#
The crow looks a little soft because my AF microadjustment was not perfect at the time I took those shots, but the camera has tracked the bird very well, even into deep shade.