Again, I repeat – information can be recovered from shadows in software. It cannot be recovered from blown highlights! Overlit areas of your photo will be white, and will always be white, no matter how you adjust them. So it’s preferable to underexpose than overexpose. Alas, the D40 is prone to overexposure.

Here’s my own D40 metering technique. Maybe it’ll be useful for you. First, I operate the camera in Program mode almost all the time. Avoid the factory convenience modes. Program does the right thing and puts control back in your hands. My primary control over the camera becomes adjusting the exposure compensation, via the info button and wheel. But if my exposure compensation is too high, I get blown highlights – the camera doesn’t adjust effectively.

So to monitor my highlights, I keep the back screen in Highlight mode, which causes blown highlights to flash, making them easy to spot. From there, I can make judgment calls on how much blown highlight I’m willing to tolerate. Personally, I actually like the look of slight overexposure, and I shoot with no flash in low light most of the time, so bright light sources blow easily anyway. I make this decision shot by shot, subject by subject. It’s slightly distracting, but the feedback gives me a great sense of how I’m shooting.

Find your camera’s weakness, and turn it into a strength. In a way, the D40′s poor metering design has made me a better photographer.