As others mention, the D40 has better image quality, better metering, better AWB, and a bigger, nicer LCD screen.
On the other hand, buy selling the D70s your giving up features like wireless TTL flash, Auto bracketing, and AF with non-AF motored lenses. Plus the D70s is a bit heavier, a bit bigger, better battery life, and is said by some to have a better grip.
So it all depends on what your going to use it for. If you don't plan on going above ISO 400 and/or are going to be using strobes, the D70s would do well. If you want something to compliment the D90 for low-light shooting or just general all around use, the D40 would be great. Just remember that 35 F/2 won't AF on the D40.