Photo Noise

It's very hard to see anything along the lines you're describing while looking at the image at less than full resolution (the "original" resolution image on the site you've linked to is still only 1550 pixles wide - which means there's a lot of data missing, and whatever process got the file down to that resolution may have also killed off the noise you're describing). So, crop out a 700-pixel-wide section of an exampe area of the image (presumably a section with details in shadows) at 100%, and we'll get a better look.

But just off the top of my head: the image appears somewhat underexposed, at least in the areas that likely most matter (the kids' faces). A bit more fill from your flash would probably have helped, but it would have flattened things more.

It will also help if you mention your workflow. Are you shooting straight to JPGs? RAW? Which software touches your images along the way?

I don't find the noise objectionable at the resolution you posted. Post a portion at 100% like Matt suggested.

You say it is lacking "punch", maybe if you posted an image you think has good punch, we could understand the issue better.

The image looks rather cold to me, I think it should be warmed up. I usually adjust the color balance in the raw conversion. And accurate color balance isn't always best IMO, early or late in the day the viewer expects a warm image.

Diffused speedlight (-1.0 ev)

I had to zoom into just the eyes to see any evidence of flash at all. In other words, your flash isn't doing anything in terms of helping the exposure. No light or bad light simply increases your noise. Even as fill light, you need the light to raise the shadow level and thereby reduce noise. With Nikon, you could have the flash set to iTTL "BL" in which case the flash acts as a fill light. OR, you could use iTTL without the BL, in which case the flash acts as more of a key light. If you had the flash set to BL and then turned it down another stop, it is possible to negate any flash value. And then you have it diffused... but how? Bounce diffusers outdoors are next to useless. The bottom line in terms of noise: you need better light.

A lot of people are un-naturally sensitive to noise to the deteriment of their enjoyment.
Perhaps with having shot film in the past I expect and tolerate a small amount of noise with digital in low light situations and am not worried by it. Though I can understand that if your circle is comprised of noise fanatics you have a problem.
The drab and flat comes from the quality of light being used and may be able to be corrected in editing to a degree.

No noise visible at the sizes you post. White balance is a bit cool, and you've got some definite raccoon eyes going on.

Best advice I can give you at this point is to learn a few basic editing skills, and to NOT pixel-peep.

Like the previous responders, I see no problems with noise in the image you posted. A d700 should take absolutely fine, almost noise-free images at ISO=800 unless you are trying to significantly lighten up shadow areas in post production.

WRT what you described as "lack of punch", it could mean many things, so I took a guess and tweaked it a bit to make the subjects stand out.

First, here is your image simply downsized to display in-line in this thread.

See if this tweaked version is along the lines of what you are looking for. If it is, and you are interested, I'll describe what I did.

Tom M

Earlier this evening, I only had a minute or two to try to brighten the shadows on the faces of the subjects, barely started to control the contrast and distribution of brightness in the image, and did absolutely nothing with the colors / saturation. This left the subjects with a rather lobster-like complexion, so I worked on your image a bit more ...

Thanks so much everyone, I totally appreciate all your input.
Tom cheers for working on the image. I actually had a look at it after reading some comments and came up with a similar result by increasing the white balance and bringing the raccoon eyes out with the dodge tool, and a bit of a retouch to the photo too gave an amazing difference.
The thing is generally I'm not used to having to work an image so much in PP. Typically I get it right so a minimal amount of editing is required, but with this one I was a little shocked to how badly the light turned it out prior to PP. Also with the comment about pixel peeping, I admit I sometimes can do that by zooming to 100% where you'll find the noise.
I actually went up to the same location this evening at the same time and took some shots to experiment. The light is really soft to the point that it gets too dark in certain spots and I feel I'm probably shooting too late in the day, given the dense greenery of the area, whereas down at the beach is a different story, plenty of ambient light.
Again, many thanks to everyone, it's through these forums that we all learn!
Nick