What kind of shooting do you do?
The jump from a K110D to a K20D for me was a HUGE jump, much bigger than the jump in lenses would be. From a K100D to a K-7 would be a similar sized step, but only in the right conditions. It's still hard to say EXACTLY where the improvements would be, because not enough are in enough hands to be sure, but we can make some educated guesses. For example, switching lenses would improve your low light performance by giving you wider apertures, but switching cameras should significantly improve your high ISO performance and be a revolution in autofocus performance. Never having had one before, I didn't think the front wheel was a major improvement for me, but I haven't yet gotten to the point where using it for adjustments is second nature; other people refuse to live without it.
It's something of a controversial feature, but if you've ever lusted for video but been unwilling to pay $500 for an occasional use HD video camera, the choice is obvious!
However, $1300 buys nice glass as well; it just all depends on what gap you're trying to fill or what ability you'd like to purchase.
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But Mom, Pentax IS rebellious
Pentax K-7, K20D
Pentax SMCP-FA 35mm f/2.0 AL -- Pentax SMC 50mm f/1.7 -- Pentax DA 50-200mm f/4-5.6 ED -- Sigma 28-70mm f/2.8 EX DG IF Aspherical -- Pentax DA 18-55mm f/3.5-5.6 WR
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