persya

Ok, your F stops are basically the size of the lens aperture (the hole through which your camera takes in light). The smaller the number (F 1.8, F2) the larger the hole, and thus the more light you get to the film or digital sensor. For low light photography you want as large an aperture as possible, which means smallest number. That's why you've been recomended the f 1.8 lens.
IS is not really neccessary for what you want. At F4.5 (the maximum size apeture on the IS lens), you're still going to have slower shutter speeds than the 85mm at F1.8 (and so blurrier pictures). It doesn't stop the image from bluring if people are moving, just helps prevent camera shake (your hand moving slightly while the shutter is open). If they did an F1.8 lens with IS and you had the money to spend I'd say go for it, but the F4.5 IS lens really isn't suitable for what you want.

I'd recomend you find a decent canon lens with F1.4. You'll be taking better pictures in lower light conditions than both of the above, and I think it'll still be cheaper than the IS lens. I don't know what the maximum ISO setting is for a Rebel XT but I'm sure you'd be fine in most night time indoor locations at about 1600 ISO with an F1.4, particularly if you're not printing your pictures and so can take very big pictures and reduce them in size.

Hope that helps a bit

i responded to this on myspace! i'd repost it here for you but it looks like its already been covered