While I do not have any experience with Nikon VR (don't own any lenses with it in them, yet), I think the image is totally useable. It could use a run through noise ninja, but other than that it looks darn good for no flash at night.
I use a D300, and will often set auto ISO with an upper limit of 1600 ISO for shots like yours. I would normally use flash though, so I don't encounter the issues you had with one exception. The max synch speed for the D300 is 1/320 which might not totally freeze the kite if it were really moving.
Again not knowing the limits of the D5000, this technique may not apply, but with the D300 you can focus trap an object like a kite. If you know that it will fly through a certain spot in space, work this out with the person flying the kite before hand, then you can prefocus on that spot manually. Then set the camera to only fire when it is in focus, not on shutter release by you. Just hold down the shutter button, and when the kite is in focus, the camera will automatically take the image.
Also, do use the historgam alot. Get used to it, and how it relates to what you will see when you reveiw the image on your computer. I have backed down the LCD brigtness on my camera, as it is now closer to what I see when I review images in post. The suggestion for shooting RAW is a great one, anything which I think might benefit from tweaking in post I shoot in RAW.
Here are a couple of images (not of kites, sorry) but they should show what is possible with a fast moving aerial target.
Both of the above were shot at ISO 500, 1/2000sec f4 at 200mm on my 80-200f2.8 lens. Notice that they are sharp and that there is no prop blur at all. These machines were easily moving faster than a kite. I was shooting bursts of 20-30 images at 8 fps though so some were not in focus, but a good 80% were.
Also, check the D5000 manual for focus tracking. The D300 can focus and track a subject based on color. Just push the shutter halfway when the focus box in the viewfinder is on the kite and then keep it half focused. The camera will track the subject for you.
Cheers,
Sean
