Okay, I'm gonna recommend 2 different TVs.
1. Sharp Aquos 40" 1080p LCD HDTV** (LC40E67U) Here
It has 4 HDMI inputs so you wont be looking for a spare jack anytime soon. Has a terrific contrast ratio of 25,000 and a true contrast ratio of 3,000 : 1, so your blacks will be dark and colors pleasing. Sharp makes a terrific unit.
The next one I'm recommending will be a bit more controversial.
2. Panasonic Viera 42" Plasma HDTV** (TCP42X1) Here.
This is similar to what I have myself.(except mine is 1080p) It has a near unbeleivable contrast ratio of 2,000,000 : 1 and a true contrast ratio of 30,000 : 1, so your colors and black levels will be near real life. I like the Plasma technology because the refresh rate is far superior to the LCDs (especially in your price range.) With high speed gaming, it is incredibly useful to not have any motion blur.
Additionally you have a better viewing angle with the Plasma. Although the Sharp unit is great, you will see colors shift as you move from left to right in front of it, not so on the Plasma. Finally the Plasmas are made much more durably than the LCDs. If anything impacts the screen, the plasma has a much better chance of surviving it. LCDs have soft flexible screens, and can be damaged by a sharp blow. ***(NOTE: I am thinking about the Wii as I write this. There are countless videos online of people loosing the grip on their Wiimote, hitting the LCD screen, and destroying the TV.)***
I speak from experience when I say that my Plasma has received quite a few knocks that would have killed an LCD, and is still working flawlessly. That being said, a Plasma TV is not invincible.
I used to not recommend Plasmas for gaming because I was afraid of "Burn-in". Turns out "burn-in" isn't a concern anymore with the quality brands. The new screens are very adaptive, and are almost immune to this. I game on my Plasma, and have a couple of friends that game on Plasma TVs, and none of us has suffered any problems.
If price were no object for you, I would probably recommend one of the higher model LCDs. The newest, and best have refresh rates, and contrast ratios that rival the Plasmas, and have just as good viewing angles.
In your price range though, I thought it best to offer you two choices that might suit your needs.
The Sharp has the higher screen resoloution, and the Panasonic is larger, and more suited to agressive gaming.
Good luck, and good gaming! 
