Modern flashguns interface with the camera through the shoe, they have extra contacts on the bottom to do this. Really though get an angle adjustable one, so you can choose to bounce the flash off something. Some come with a clip on Fresnel screen to soften the light while others have a plastic reflector. You can make a temporary reflector from a bit of white paper or card and an elastic band. A very few have a zoom function too.
I prefer to use natural light wherever possible but that isnt always an option. Always on lighting is my next choice but carrying a set of studio lights may not be at all practical.
The built in flash guns on Canon cameras arent as bad as you make out. Usually though the results are a little dim so look through the manual on how to change flash response, there is a setting for this on the 40D and 350D in the menus.
Look for flash control/built in flash func. setting/flash exp. comp and rack it up a little. On mine its the second spanner menu at the bottom, its the same on the 350D but may be elsewhere for you. As with overclocking do it gradually and take test photos between adjustments.
If you do go for an external flash always try to test them first *ON YOUR CAMERA*. Buy one that suits you rather than the supposed best. Make sure your test results are good and the lighting is even. There should be a separate set of function adjustments for external flash guns too.
I have a picture of my brother, his wife and their two kids somewhere, taken by him. It shows that even with excellent equipment you can still EPIC FAIL at flash photography. The result is the flash is far too sharp and they look like they are long lost relatives of the Adams family. Im not joking, it really is that bad. His daughter has expressed an honest wish that the photo be burned, I dont blame her but Im not that nice
