Hi there, that's a sweet camera. I've got the Canon 20d and the Nikon d100 (love them both) so I might be able to help ya too.
Let's see, the 350d has a 1.6x factor so any lens you buy will have effective focal lengths of 1.6 times it's FL (focal length). So, a 200mm-500mm lens would work like a 320mm-750mm lens. You get the benefit of a teleconverter/extender without the f-stop reduction. Excellent if you're wanting to do telephoto photography! The down-side is that if you want to do wide angle photography, you either need to get a dx type lens or get a lens that's really wide to compensate for the 1.6x factor. That is, an 18mm lens would be roughly a 28mm lens.
Now, good glass equates to nice crisp images with very little if any distortion or chromatic abberation. But good glass costs money. You can certainly get very nice lenses for the upper end of the price range you mentioned.
I agree with Mike that the 18-200mm lens is a pretty grand stretch. You may be gaining range but sacrificing clarity or speed (how wide open the widest aperture is). I'd look for reviews of it first. It may be worth it, I just don't know.
IMHO I'd recommend getting a solid wide-angle to normal range lens (if you're looking for zooms) and a telephoto zoom (or prime) instead. It all depends on what type of photography you want to do. If you're interesting primarily in landscapes and scenics, then you'd want a very wide angle lens (remember the conversion factor). If you're more interested in doing portrait work, then a solid 85mm would be dandy. On the other hand, if you want to do sports/wildlife-in-situ photography, then you'll want a fast supertelephoto lens (or zoom). For this kind of photography, lighting and subject movement are factors that make a fast lens important.
Since your body has a Canon mount, you'll want to be sure whatever you buy has the same. Of course, Canon makes super lenses. There are 3rd party lenses that are also very good, but watch out for those that are lousy. You certainly don't want purple fringing around your edges or barrelling or blurry edges. Also, make sure that their mount is fully compatible with your camera so that all of your camera's functions and modes will be operative.
Hope this helps.
Happy shopping!
