I'm bringing this slightly old thread back to life... I recently purchased a Nikon D50 w/kit lens refurbished from my local Shutterbug retailer. It was just under $500 for the body/lens. I didn't really want the lens, but that was part of the package, although the receipts priced the D50 at just under $400 and the 18-55 kit lens at $100 as if they were purchased seperately... don't know why.
The camera/lens combo were factory refurbs with 90 day warranties. I added a Mack 5 yr. warranty (still digital under $500) for $60 because I had heard of a few D50s having shutter problems under warranty, and wanted to cover myself there. But, still with the extra $60 the camera seems like hell of a deal. They were sealed in factory boxes (which did say 'refurbished') and came with all the usual stuff the new ones come with. Camera was for all practical purposes, brand new. The 'new' ones were around $200 more.
I asked the store manager what 'refurbished' meant, and he told me they could have been reps cameras, factory returns, or cameras that didn't pass some QC issues during the original manufacturing run, and were flagged to be 'corrected' before going out of the factory. The cameras/lenses that were rejected at that point were pulled off the assembly lines until that run of manufacturing was done, and then sent back to be brought up to spec later. They were classified as 'reconditioned' even though they had never left the factory in the first place, and they were packaged in different boxes for reconditioned products. That's basically the story I got from the store manager who works closely with Nikon reps.
Bottom line: I'd feel comfortable with factory reconditioned products, but be a bit careful about who I purchased from if doing it online. Buying locally I got to handle my camera first and give it a thorough inspection before committing to that particular one. Also, I have someone local to go to if I have questions or problems. Makes a huge difference to me. Cheers. -pdxflint