My take on the high ISO NR in the 40D is that it's surprisingly good, visually, but if you're looking to capture fine color detail a lot of it can be lost. Simply stated, it is very aggressive in removing color noise, so much so that it can affect the subject colors.
I've done some Raw + JPEG shooting and comparisons, and I've found that careful conversion and post-processing of a raw file can most often yield an image that looks as good as or better than a JPEG shot at high ISO with the NR turned on.
Think of the high ISO NR much along the lines of JPEG shooting itself... A big time saver for making acceptable images.
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If High ISO NR is not applied to the RAW files, why would there be a reduction in FPS when using it (assuming RAW only images being created)
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There is
ALWAYS a JPEG created, even when shooting in pure Raw mode. The JPEG embedded by a 40D in every single .cr2 file is a quite good quality 1936 x 1288 pixel "preview". To that image the NR is applied. These embedded JPEGs are quite good enough to use for many purposes not requiring the full resolution of the camera.
It will be interesting to see what size the embedded 50D JPEG previews are.
-Noel