Hi Raz and welcome to the forums!
As you mentioned, kit lens is indeed very impressive, and since you have looked at the Canon gear (based on the link) - its beyond than "much better" than stock kit EF-S 17-55 Canon supplies, I think I've used that EF-S for about a week, that's how disappointing it was.
Pentax DA 18-55mm on the other hand is fairly sharp, versatile and beautiful colors, imo - best kit lens period! I actually ordered my camera in "body only", but after seeing so many fantastic captures with that lens, I had to get it just to see for myself!
Blurring background - well, you are right, DA 18-55mm is not as fast, but there are always a way around. Generally speaking, these things will attribute to the narrow depth of field:
-Closer you are to the subject
-Longer focal length
To achieve even more blur on the background, subject has be be as far away from the background as possible. So it is very well possible with the kit lens, but - only in a good light condition (unless you are using flash)
Otherwise, the alternative to EF lenses you will have is Pentax FA 50mm f/1.4. Wonderful lens, much better built than EF f/1.8 or f/1.8 II, sharp, solid, just a pleasure!
If you want to start on extreme budget, do not overlook Pentax SMC A 50mm f/2, sure, it is a manual focus lens, but in fair condition, it can be purchased for about $20-25, like new for under $50, now thats budget
Regards,
D