My camera doesn't have a built-in flash (and is big & bulky), so I often take a similar small Canon flash with me - the 270EX. If I was the OP, I wouldn't bother with that small of a flash because it mostly replicates the built-in functionality, and costs a lot in his budget and starting point. I'd get a used or off-brand "real" flash instead in order to fit the budget if need be, but would put that lower in the priority than getting a fast prime lens.
ZippyDan, I suggest you deal with the lighting separately -- use daytime and natural light as much as possible. Use the built-in for daylight fill flash and when you must. Save your money for a 50 f/1.8 or better lenses or flashes down the road. A 50 f/1.8 would be like a standard "portrait" lens on a crop DSLR, and would, in addition to being optically better than the kit lens, give you the ability to blur the background and focus more on the subject. A 50 f/1.8 could be cheaper and lighter than the flash, though it would be maybe a bit bulkier than the smallest flashes due to the shape, but would make up for that with pictures you otherwise wouldn't get or be as good, and also give you much better low-light capability.