What camera should I upgrade to?

I have been using my old D40 for years now and it served me extremly well. However now I decided I want to upgrade to a new camera. I'm looking for a camera that can also record videos. I was looking toward the D7000 or the D5000 but to be honest, i'm not exactly up to date with all the Nikon cameras so I'm looking for some suggestions. I will be buying a used camera up to about 700$.

In current scenario D3200 is nice for you if you want to AF-S since D3200 don't have in-built AF motor.7

D7000 has in built AF motor so you can use your some old lens. D5000 is discontinued model. It has been replaced by D5100 which quite popular in Entry Level segment for same sensor of D7000.

PS: D5100 too don't have in built AF motor.

The D5000 has been replaced by the D5100.
A used D7000 will cost you more than $700.

Going from one entry-level model to another entry-level model is a waste of time (especially if you only own the 18-55 kit lens), but the Nikon D3200 is probably your best bet. The 3200 is the newest descendant of the D40.

If you want a nice reasonably priced camera that can shoot videos right now; the d5100 is your best choice because of the articulating screen. It is also coming down in price because the d3200 just came out.

Other than that I would wait for the d400 or d7100 to come out and see the specs on those.

I just upgrade from D3000 to D7000 and found everything I was looking for in a mid-range camera except the full-frame part, which I was ok with. It takes great shots with the same old 18-55, 55-200 lens that I got with D3000. However, I also have 1.8G 50mm and the kit lens 18-105mm. It's amazing. With so many features at your finger tip. Two user modes (U1 and U2) is a great plus too. There are very good tutorials on d7000, which are a must to use this camera in the best way possible. I also like the 18-105mm lens I got with it. Even at f3.5 i get very nice bokeh effect as good as my 50mm prime lens at f1.8. With so many scene modes (around 19 of'em) you also can let camera decide a lot for you.