the sony rx100 is the perfect camera for you. you won't see a differnce between it and a nex except that you will get better pictures because it easier and simpler to use. it is also more portable so you will take it more places and therefore get more quality pictures. i doubt you want to buy several $400 lenses and worry about which one you need at any moment and then hurry to change lenses while the little ones are in perfect poses. lets face it, like the d40, you won't lug around the nex and a bunch of lenses all the time, while you won't think twice about putting the rx100 in any pocket and always having that f/1.8 lens avialable. you also have the d40 to fall back on which will focus better on moving objects than any nex or the rx100 - if your kids move at any speed indoors, the nex will rarely get them in focus. the rx100 is also one of the best cameras for video. check out dpreview's review.