you are going to want something fast with a decent amount of zoom, if you can spend your money on lenses so if i were you i would check out the canon 70-200 f4L USM it's like 650 on b&h after rebates which is a really good zoom lens it's availible with immage stabilization for about another 400-500 bones which is controversial but well worth every penny in my opinion.
Would agree with all here and say go for one of the 70-200 L series lenses. The F4L is the cheapest but won't be great in low light. The IS version will be better but for the same money (give or take) you can get the F2.8 version which will have better low light performance (there is also an IS version of this lens).
Now they are all stretching the budget a bit but you are paying for what you get so more expensive is (generally speaking) better. Those are the best selection you could do but alternatively you could go with 3rd party produced lenses (such as Tamron/Sigma). These won't be as good the Canon L lenses but can still get you good pictures. Here is some ideas:
Obvisiously look around for better prices and also for reviews before you buy. You shouldn't need anymore than 200mm of zoom and you can keep the kit lens for some landscape/outdoor shots. If you can invest in a tripod and it will also help matters.
"Without the possibility of Death, adventure is not possible" Reinhold Messner
yeah look at sigma and tamron if you dont want to spend a ton
theyre not as good, but theyll get the job done
if you want something good for indoor basketball games and stuff get a 50mm 1.8 lens
you'll probably have to be shooting on the floor, and you obviously cant zoom in and out, but 50mm's are awesome and they cost like $100
and check out the used sections on bhphotovideo.com
Of course the f2.8 IS L is out of the price range but it is for reference.
A 50mm F2.8 (or F1.8) would be a good choice but is unlikely to give you the range of zoom that you want (not being a zoom lens).
Something to consider would be something like a 28-70 or a 28-130. These are within the price range and should still provide you with good range without the same price as the 70-200 (but also without such good optics).
Also to consider is the 2 lens kit I posted before which has Tamrom 28-75 and 70-200 f2.8 with free monopod in one package --> http://www.calumetphoto.com/item/TR39500K1/
Again out of the price range realistically but a pretty good deal if you can stretch that far (there is another kit with a 17-50 instead of the 28-75).
Another idea might be this 50-150mm Sigma f2.8 (not sure of the quality - although APO isn't bad).