Moderately cheap SLR for portraits?

I'm starting my own photography business, I have a canon powershot, but am looking into getting a good SLR camera that will be good for portraits shots, mostly of children.

Are the lenses for a Canon Powershot S5 IS any good?
Is the Nikon D3000 good for portraits or people? Any other suggestions please?

The Canon Powershot S5 IS can't exchange lenses. There may be screw-on lenses that are mounted in front of its fixed lens, but these are garbage.

Basically any recent DSLR will do a good job for portraits. Unfortunately the Nikon entry level cameras will not autofocus with the most popular budget portrait lens, the 50mm/1.8D. In order to get autofocus with them with a fast 50mm prime you'd need the better but also much more expensive 50mm/1.4G (not D) lens.

There's no such problem with the other brands.

Forget it. Portraits aren't about the camera you have, the detail is in the lighting. If you have good lighting, you can even use a cameraphone. The Nokia N8 was used to shoot the cover of January 2011's Pix Magazine.http://www.pixmag.co.za/2010/12/pix-magazine-decemberjanuary-2011-cover-shoot-using-the-nokia-n8/

So you see it's been shown that it's possible to shoot magazine standard portraits with a cameraphone, provided you put the effort into getting the right light.

My personal choice for portrait work would be a Canon 5D (mkI, AKA 5D classic), and 85mm f1.8 lens, and in my opinion the price is a reasonable for the package I get. I'd also be looking at spending at least £100/$200 on lights, stands and modifiers.

You have a ton of work if you want to make it a business. First, it requires that you go to a school for photography, or get enough rep so you can get clients.

second, if you are going to get into portraits professionally, you will have to get at least a semi pro camera, such as the Nikon D300s or D700 which cost thousands of dollars. On top of that, you will have to invest in lighting systems which can cost a pretty penny, a good tripod, very good lenses, and some other small stuff.

Total cost, minus college, I would say at least $3000-$5000

the D3000 is a good camera to learn on, and after that, you can upgrade to a semi-pro once you learn how to correctly use the camera. It is not the camera that you need to focus on, it is the lens and lightwork you have to work with.

I would recommend a DSLR over an SLR. SLR' were specifically for film and that is harder and harder to get these days especially in professional emulsions. So if a DLSR is now what you aim for in a professional camera, (you do intend to sell your work?) I would recommend the Canon Rebel series. They are at the bottom of the line Canon line but still great cameras. You can build on these such as purchasing 135mm lens for soft focus which is an excellent portrait lens but pricey, at $550.00. The Canon S5 IS is NOT an interchangeable lens camera. Powershot cameras do not have fully interchangeable lenses. It seems you are terribly confused as what cameras are for what purpose. There isn't any hard and fast rule that says you have to buy a $500.00-to-$700.00 camera plus $550.00 for a lens in order to be a professional, or sell your work.
So I see no reason why you could not start out with a Canon SX30 IS (also a non-interchangeable lens camera) and still get the results that are sale-able. But as you grow photographically you can save for a DSLR like the Canon Rebel cameras.