A drop bar, or road bike, will be more pricey. I would stick to the flat bar hybrid with your price range. Yes, the FX7.2 rides nicer, and the 7.3 even nicer yet. For the most part, higher pricer = better components (or frame) = nicer ride. So if you can afford to go up in price a bit, you will probably like the bike more. But the 7.1 would be fine for your purpose. I'm sure any of the Treks, Cannondales, Specialized, Giants etc will ride and feel so much better than your old bike. So try some out, but do yourself a favor and try a few different brands and models, and make sure the bike shop fits you to the bike!

If you do like the FX, you may very well be able to find a lightly ridden used one out there, and probably a higher model than a 7.1. Trek sells a ton of FXs, and often people stop riding or move on to other bikes (road) after starting with a hybrid. Me, I love my hybrid. Consider a Cannondale Quick, in your price range it would probably be a 5 or 4 model. I have a 3 and it climbs pretty well. The 2011 models should be on sale for very good prices right now, because the 2012s are out. You CAN often negotiate price, however some shops already have them marked down and there's not much room to come down further. It sounds like you found a decent shop that'll let you try the bikes out without a hassle.