There is dust on the viewfinder of my Nikon D40x.

Are you sure you saw this in your D40x?
I know this is in my camera under personal settings and called raster in viewfinder. But I can't find anything in the D40 or D40x manual.

That's the way the D40x works. Nikon introduced the LiveView feature with the D3 and D300, introduced more than a year after the D40x. The D40x works the way SLRs have worked for half a century, giving you the viewfinder for framing and composing.

No, you can't. Nikon didn't introduce the "LiveView" capability in their dSLRs until the D3 and D300. The older D40x requires you to use the viewfinder.

Do you only see the spot in the viewfinder or does it appear on the photos? Could be dust on either the sensor or the focusing screen.

You don't. The D40x works as SLRs have worked for half a century: you frame your picture through the viewfinder. Only more recent dSLRs have the LiveView capability.

Seems like your problem on greyish/blurry viewfinder is caused by the camera getting water logged. Get your cam cleaned by Nikon.

The flashing red light usually happens if you have this indicator set in the camera. This may not necessarily be an error.. just a setting that you have put in place in your menu.

Here's a link to a firmware upgrade for the 40x. It doesn't specify exactly what issues it fixes. http://help.nikon.ca/app/answers/detail/a_id/16418/kw/40x%20firmware/r_id/116679

That's because the Nikon D40x does not have Live View. Up until a couple of years ago, no DSLR's had live preview, due to the design of a DSLR over a point and shoot, as it has a pentamirror arrangement that effectivly deflects the light path to the viewfinder and only to the sensor when the internal mirror is raised. Early live preview models from Olympus had the world's first Live View system by flipping the mirror so that the picture preview could be seen on the rear monitor. Most manufacturers now incorporate Live View into most of their models but most Nikon consumer models do not as yet, apart from the newly relesed D90. The D40 and D40x are two year old designs and therefore do not have the more "modern" specs of say the Olympus E520 or Canon EOS450D. Most photographers trading up from a compact to a DSLR are surprised when they cannot use the monitor in the same way. However for most aspects of DSLR photography Live View is not something that is used all the time, low down shots, macro perhaps being the most convenient use, but for general photography there is no substitute for framing through the viewfinder, that's what we've been used to doing for over half a century! Besides as pointed out previously a DSLR is often too heavy to hand hold at arms length especially with a long lens.

Push ring circling OK button to up or down positions and LCR display will change showing info or image. 

No, since the camera is a DSLR, there is no way for the CCD sensor to have an image until you take a picture. The shutter covers the sensor until you actually take the shot.