First lesson in photography: It's not what you have, it's how you use it!
Second lesson in photography: Learn how to edit photos to cover up any inadequacies from the first lesson.
You may want to consider a used or refurbished camera, especially if it's the first thing you're going to be purchasing. Many people buy cameras second hand and they're usually fine provided the seller is reputable.
My camera is the EOS 1000D - The one before the aforementioned 1100D. This camera, at least for Canon, basically invented the "entry level" standard for their range. I don't think they had a more basic, new, camera available at the time. Used ones are sub £200 and they should be perfectly fine to use. However, this camera came out before the generations of video DSLRs were really even invented - So no video functions. If you need video, look to the 500D or 550D, but that will break the budget.
I can't speak for the Nikon range, but from the specs, I'm not a huge fan of their entry level stuff. Their lenses can be a bit cheaper, but they have a strange internal focusing mechanism which means some older lenses (not prehistoric ones, just somewhat old) will require manual focusing. It's not a massive problem, but it's something to consider.
Here are a few pictures for you to look at just to see what an entry-level, 4 year old, camera can offer (It's also a great plug for me):
Image 1Image 2Image 3Image 4Image 5Trust me, old cameras and used ones will be fine. To be perfectly honest, I have been disappointed at how slowly the new Canon cameras seem to have been developing. Many of the new ones are carbon copies (or with very little in the way of advancements) to the older ones.
The trick is knowing how to operate the camera (by experimenting), picking the right lens (by experience) and editing (through practice).
A £200 camera with the 18-55mm kit lens plus a £80 "50mm f/1.8" by Canon (when you're ready. The kit lens will last you some time) would be a fantastic investment for under £300. The 50mm lens does not zoom, but it produces those amazing effects where the background is all blurred.