It's a decent deal on a piece of very outdated equipment.... I personally wouldn't go for it... At that price point, a better buy is a Canon S95 point and shoot... More zoom, better low light capability... Newer sensor....
If you're looking to get into a DSLR, I recommend you join the forum over at POTN...(google it)... In their classifieds, the Rebel XS with kit lens goes for $300-$350... But if I were looking for an entry level DSLR, I'd be looking for either a T3i, or a good, used 40D or 50D... The 40D or 50D especially if you've got regular human male sized hands.
I got a used Nikon D60 DSLR camera (frame + AF-S DX 18-55mm VR lens) for 250$ from and old lady that never used it (christmas gift). I got very lucky but if you search, you'll find great deals!
the T3i will be dropping in price inevitably before too long... Canon seems to have gotten themselves on a 1 year replacement on the Rebel line.... I'm not quite sure what they were thinking with the T3... I guess just an entry level, low cost version for the cash-strapped folks.... but everyone has to start somewhere....
Their point and shoot cameras are coming a long way though, the new S100 has a Digic 5 processor, which is the same chip used in the brand new Canon 1DX.... so, that's super-duper awesome... I recently picked up a Canon SX230HS as a "sidearm" ... and it's a pretty stout little point and shoot... it does great in low light...
It depends on what you're looking for I suppose... But, for anyone looking to enter the world of DSLR goodness, let me know via PM... I actually run an "invitation only" forum for photographers I know.... a pretty dang good group of guys, we have bi-weekly competitions to work on our skills, discuss processing techniques and trends in photography, provide real-world reviews on camera gear that we own, and all sorts of other fun stuff.... but since it's invitation only, you've gotta let me know if you want to join.