I hate flash. Never use it. I have fast prime lenses instead. Since you don't have that (or shake reduction), you might want to consider a small tripod and learn to use the 2 or 10 second delayed shutter release. And get people to stand still
You also should be able to drop the flash intensity. On the very rare occasion that I've used flash I usually dropped it by 2/3 to 1 eV and that makes it less offensive. But I truly despise flash so I'm not the one to ask about technique.
Your better bet would be to try and get a "fast 50" lens. I don't know the Canon stuff well, but maybe this:
http://www.adorama.com/CA5018AFU.html
or this
http://www.adorama.com/CA5014AFU.html
or this
http://www.adorama.com/CA352AFU.html
Any of those will allow you to shoot in much lower light, but you won't be able to zoom. That's what god gave you feet for though...