Wouldn't 2 different lenses be able to handle 1, 2 and 3 above? So, for example, could one lens be able to handle 1 and 2 and use a different lens for 3? How important is it to have the IS feature on a lens as I do see the considerable difference in price over one without IS?
Yes, you'd probably get away with two lenses - though it depends a bit on the distance from which you're trying to take the photos
IS isn't strictly a requirement - what this does for you is help stabilise the picture. That is very useful if (a) you don't have the steadiest hands in the west, or (b) are trying to take photos in not-great light conditions (in which case, it will allow you to avoid increasing ISO by some margin, which in turn means 'cleaner' pictures).
Personally, I would put greater priority on lens speed than IS. Each stop on a lens represents doubling of speed, after all. So an f4 lens, for example, is
twice as fast as a f5.6. And f2.8 is twice as fast as f4. This isn't a minor matter (which is why people are prepared to pay so much for quick lenses - it matters, and is the difference between being able to take a clear photo or not). So if you can afford it/are prepared to pay for it, faster lenses are worth having.
My early suggestions would still include that 70-200 f4 lens - which should be decent enough for the action shots, except in really poor light conditions (where you'd be wanting something at f2.8 or faster). It will also do decent portraits outdoors.
Canon EF 70-200mm f/4 USM L - Review / Test Report Of course, the f2.8 version is better suited - but there is a very large price differential, so if you want a reasonable alternative, this lens is probably it.
For indoor portraits, you probably want something that is both wide and quick.
Canon's 17-55 f2.8 IS would be excellent, but perhaps a bit pricy. A reasonably priced alternative is
Sigma's 17-70 f2.8-4.5 (not as good as the former, but respectable). Bear in mind that it is only f2.8 at the wide end though!
One last lens that you might consider picking up is
Canon's 50mm f1.8 II. This is a very inexpensive lens - actually the cheapest - unlikely to set you back more than about $60. A 50mm isn't
that useful on a cropped sensor camera, and the build quality isn't the highest either. But it is a good lens that delivers well in poor light conditions. It takes good portraits too (and the fast speed makes it very suitable for indoor use - providing you have enough space, as it isn't that wide). Here's an example from this lens, combined with a Canon 350D (Rebel xTi):
Boxer Dog Photo Gallery & Postcard - Henri - 7 years