Note that Site Templates aren’t the same as Site Definitions. Good article about how to do this here. Or read Creating a Custom SharePoint 2007 Portal Site Definition using the PortalProvisioningProvider Class for ‘portals’ (I agree – that’s the most over-used word in SharePoint, along with confuse over what a ‘site’ is (sometimes a collection, sometimes just a site…)).

It’s worth considering the differences between (more here). Some of the differences demystified (note – about Beta 2). Info on how to create a custom site definition (hint – copy an existing one – bit more here). And information on which existing templates are right for me.