The sales figures speak for themselves. Canon Rebels are the most popular consumer DSLR. I started out with a Rebel myself. Canon loads them with features that first-time DSLR users find really appealing.
The Rebels are great cameras, but they had a few critical issues I just couldn't get over. First and foremost, it felt like a plastic toy, when in fact it is a rather expensive toy. The camera made a creaky noise if I gripped it too hard with one hand and the shutter mechanism just sounded cheap. Also, the camera was too small and my pinky would just hang in the air below it. Superficial issues, I know, but they never stopped bothering me.
I suppose you're right about the lens issue though. I should clarify and say that Nikon carries more lenses that I'm interested in. A major factor is that a lot of the Canon EF-S lens have that cheap plastic quality that I couldn't stand with the Rebels, so that eliminated a few selections for me.
Interesting how you said Nikon has a superior AF system. I've always heard that Canon did. In my personal experience, both were the same
I'm not disputing that Canon Rebels are the most popular dSLRs (although Nikon did pretty good with their D40/D60 series for a while and I know quite a few people who bought D90s because it was one of the very first dSLRs with HD video capability)... when I said Nikon had leaped ahead in dSLRs, it was in reference to the technology, not sales figures-- (AF performance, Low-noise/high ISO performance among other things.)
There is no doubt that Nikon's AF system for the last three years beginning with the D300/D3 series and including the D700, has been widely recognized as better than Canon's, even with their 1 series. Canon may be catching up there now, but Nikon did take a serious bite out of Canon with their AF performance. And the low noise issue was once the domain of Canon until about 3-4 years ago. Now they've been forced to catch up to Nikon.
I'm not saying one company is better than the other, but they're different.
Canon is much bigger, and has a huge, huge stake in the consumer market from their point and shoots to their Rebel dSLR series. They make plenty of consumer-oriented lenses and plastic feeling dSLRs (creaky squeaky camera bodies the make noise when you squeeze them.) I shot Canon for years, and really like their ergonomics for 35mm camera bodies, particularly the higher end ones. But, even my EOS A2 (not a beginner camera) had this flimsy, plasticy, creaky feel to it. That was my main complaint. It was durable and held up, but it just felt like I could crush it if I wanted to. Most of their non-L zoom lenses were similar feeling. Their EOS 1 series has always been rock solid-- night and day difference in build quality-- but huge and expensive, not geared to a typical enthusiast, amateur photographer.
Nikon won me over with the solid feel of their consumer dSLRs beginning with the D50. It just felt more sturdy, more expensive than the competing Rebel at the time. The kit lenses weren't any more substantial than the Canon kit lenses, I'll certainly acknowledge that. But, being a smaller company and one with a tradition in optics, I think Nikon has focused more on the professional cameras in their line-up due to necessity. They don't have as extensive a lens system, especially in AF, but what they do have is a heritage of making top notch professional level glass. Their pro body line-up (for still imaging) still sets the bar overall, and this is where I felt Nikon was perhaps, as a company, a little more focused on the "pro" side of their product offerings because they depend more on it than Canon does. Canon fell asleep for a while, because they had the 15 year advantage with USM lens technology, and many working pros had switched or started with Canon. Canon had the marketing and the white lenses... so their image as the pro camera was born. In order to survive, Nikon battled back over the years and where they stand right now I'm sure they got Canon's attention. So, generally, Canon can go whatever direction they want to and devote resources to it, but Nikon has to be a little more careful, and get it right to survive.
That's just how I see it...
PS: I really like both companies, and think they compliment each other quite well. It takes Nikon to make Canon get better, and Canon to make Nikon fight to survive. We need them both.