You've got a lot of interesting and fantastic input here. Let me add my opinionated opinion.
jwedehase.... had it right in the first place. Both the D50 and Rebel XT are extremely capable cameras. In reviews, surveys, etc, you will find small reasons that one or the other is a better choice. However, nothing is more significant then your existing investment in Nikkor lenses. Easy choice, IMHO.
beerguy.... comments about battery life with his Rebel. I think he has the impression that the D50s battery performs badly. Well, perhaps other have that problem. However, with one charged battery for my D50, I can get about 3 cards worth at Medium Resolution / Normal JPEG Quality. That's about 350-375 per card (512 MB).... Or about 1050-1125 total. In short, I would say that it sounds like the cameras have similar battery capabilities, without having any technical specs in front of me.
Snausages01.... is right that a D70s IS a better choice. However, the D50 is still a GREAT choice as well. So it really just depends between the 2 how much money you want to or can spend. If you got it for the D70s, go for it. Otherwise, go with the D50. I doubt you will be disappointed and may not ever notice the difference.
HOWEVER, if your wife already has some Nikkor lenses, that leads me to believe that she might have some actual photographic skill / knowledge. In that case, show her a review of the D50 and D70s from the same site. If she notices any techy things on the D70s that she just can't live without, then, er, you better come up with some more money.
And, in conclusion, I LOVE my Nikon D50. Of course, I have no reason to say it is better then any other DSLR out there. I just love it for how it doesn't suck like my old Point & Shoot Digital Camera. My WIFE even comments on how much she likes it because it doesn't lag to take pictures... And she was the one who commented in the first place that it was too heavy and bulky.