Actually the XSi does support live view mode from it's LCD screen. I know since I own one. Go to your XSi's setting's menu first. Then go to the icon with the wrench and the two dots. It's the 5th one from the left (3rd from right). From there scroll down to "Live View function settings" and click set. Here you'll be able to enable or disable the live view functionality. Once enabled you can always toggle on and off between live view mode and viewfinder mode by clicking on the set button while you're composing your shot.
That being said the only times I use it is when I'm positioning my camera at odd angles and looking through the viewfinder is inconvenient. I mostly like to compose my shot from the viewfinder. ALSO, for whatever reason, I do seem to lose the ability to auto focus one I'm in live view mode which is a bit irritating. I don't know if this is a problem that's encountered only with the XSi models or if it's supposed to function that way.
If you're on a higher budget and want to start with something with better quality then I suggest Canon EF-S 17-85mm f/4-5.6 Image Stabilized USM SLR Lens for EOS Digital SLR's and the Canon EF 70-300mm f/4-5.6 IS USM Lens for Canon EOS SLR Cameras. They're more expensive ($450-$500 each) but they're probably worth the extra money since you'll be getting better quality glass and USM (although the EF 70-300mm uses micromotor instead of ring-type USM). The only thing is that with the EF-S lenses you wouldn't be able to use them on a full frame camera if you decide to upgrade later on which is a bit of a loss since you'd spend about $450 on it but this is a slightly different topic. Also don't get the 70-300mm confused with it's cheaper (and less quality) 75-300mm cousins nor it's more expensive 70-300mm DO counterpart.
I also have the XSi (and LOVE it)... It's my first DSLR and I have learned so much with it. I ordered it with the kit lens (18-55mm) and also bought the 55-250mm. Both are great, inexpensive beginner lenses, but I have found that I am now out-growing them. The 55-250mm isn't as sharp as I would like (when the image is viewed at 100%) and, as Saleh AlMutawaa mentioned, the EF-S lenses are not compatible with the full-frame DSLRs. So, if you think you might upgrade, you might want to keep that in mind. The Rebel XSi, 18-55 and 55-250 are a great starter package.
@ Owen Gailar: It's simple. First you will want to set the mode dial (the one next to the on/off switch) to "M" mode. This will give you the freedom to set the ISO, shutter speed and aperture. To set ISO, press the button labeled ISO next to the mode dial and make a selection from the screen. To set shutter speed, just use the main dial (behind the shutter button) to select the appropriate value. For the aperture, you will want to press and hold the "Av" button (next to the upper right corner of the LCD) and then use the main dial to change the aperture value.
For metering method, just press the upper arrow button (located above the "SET" button and marked with a square with a circle inside) and choose spot metering.
Just keep in mind that the Canon XSi does not have video at all. And the LCD screen does not support live view. Other than that I think the XSi is a good DSLR Camera to start with a DSLR experience. But it is not as great as T2i.