Two suggestions:

• If you want to stay Nikon, 85mm f/1.8. I shoot with this thing at f/2.0 regularly, and it produces fantastic portraits for your price range. The f/1.4 is call the 'cream machine' by the guys over at dpreview, but I hesitate to even look at it-- it's so expensive for 2/3 of a stop better light. I own this lens, and love it. It's also useful for shooting stage productions in low light on a d300 (which is where I find myself using it a lot these days).
• If you don't care so much, check out the Tamron f/2.8 90mm macro is reputed to be a very good lens, both for portraiture and for macro work. I don't have one, but the results I see on pbase make me think that it's quite capable.

I know what you mean about moving past the 50mm f/1.8. I have a 50mm f/1.4 that I got used for a very reasonable price, but I find myself using that focal length very rarely for whatever reason. I have the 17-55 f/2.8, and it's a very capable lens (my workhorse for events and traveling), but the 85mm is something else when you know you're going to use it.

If you're buying used, I don't know if KEH ships to Canada, but it might, and if so, it's definitely worth a look.