Get the Nikon 1.8f 35mm. Perfect for low light and indoors....although I prefer a bit wider. I personally would get the sigma 30mm 1.4f but thats out of budget.
50mm on a crop sensor really isnt that good for indoors....you'll end up taking more head shots...more for portrait photography.
I use a 35mm 1.8f and its pretty much all I use now besides my wide angle zoom (im a wide angle junkie). I got rid of my kit lens. Thats only because im rarely in a situation that needs zoom. I can just crop pictures in photoshop for the few instances. You'll also like the 35mm 1.8f to take more dramatic pictures with more bokeh. phew....those baby pictures with the 1.8 would be very nice!
For a cheap flash thats pretty effect indoors use the Gary Fong Puffer popup. It attaches to your hot shoe and diffuses the light. Not perfect but a damn good alternative.
Nikkor 35mm 1.8f - $199
Gary Fong Puffer popup flash - $20
Dinner with family - $30
vola!
more info of the puffer flash and a youtube video and where to buy!
PUFFER - Pop-Up Flash Diffuser
BTW I have a D90 and this is one of my setups and I feel it takes pretty good pictures indoors without spending the $$$. But theres no alternative for good pictures. you will eventually need a good flash. Just for $20 it can be a pinch in your overall budget...and I imagine it being more portable too.