Canon faced some modest compatibility risks when it chose to design its newwith SD flash-memory cards rather than the CompactFlash cards it's used for all its SLR cameras until this point, but I think the move is smart overall.
It's a drag for consumers that there's such a profusion of flash card formats. Customers often must pay extra when moving from one camera maker to another just to replace flash cards. And indeed, owners of Canon's existing Rebel, Rebel XT, or XTi cameras will find theiruseless if they upgraded to an XSi.
But the reality is that Rebel XSi (also called the 450D and Kiss X2 in various parts of the world) customers are more likely to be upgrading from a compact camera, a market where SD dominates. And from a technical perspective, SD performs fine, takes up less critical room in the camera, and in the newer SDHC incarnation can match CompactFlash's 32GB capacity.
CompactFlash memory has been a mainstay in the SLR (single-lens reflex) camera market, but SD has gained a foothold. Nikon's entry-level SLRs use SD cards, as do all from Pentax, Panasonic, and Samsung. And Canon's top-end 1Ds Mark III accepts both SD and CompactFlash.
Now if we could just get rid of xD Picture Card from Olympus and Fujifilm and Memory Stick from Sony, we'd all be better off. Fujifilm wisely has started selling compact cameras with a dual-use adapter that can accept SD as well as xD, and I'm hoping that's a harbinger of things to come.