I found a link to an excellent article in the "Beginning Sharepoint 2007 Administration" book that is worth mentionning.
It describes how to create a new site definition by copying an exitsing site definition using the Sharepoint Solution Generator for Visual Studio. If you need to create a site definition, then check out the article on Serge van den Oever's Blog
http://weblogs.asp.net/soever/archive/2006/11/11/Sharepoint-Solution-Generator-_2D00_-part-1_3A00_-create-a-site-definition-from-an-existing-site.aspx