OK, you will get a much better sound with a $1000 5.1 vs $1000 7.1 ...
So a 5.1 for $1000 isnt a bad budget, the hardest part is the sub...
Heres what im thinking...
Pioneers new speakers, everyone is raving about them, and I personally heard them they are amazing for $400!!! TD just search pioneer speakers on their site, get 2 towers, the center, and the pair of bookshelfs, it comes to $400...
Next is the sub, you have $600 for the sub, so I would get the VTF2 from HSU reasearch , I use this sub, it is amazing...
Or if you dont want to spend that much this klipsch is on sale, regular $999, I never heard it, but Im sure it will get the job done, not as well as the hsu, but should be thunder for sure...
Or if your room is on the smaller to medium size, you can go with an hsu stf2 which is around $320 before shipping...
I think you will be happy with this set up {especially if you go with the vtf2!!!}...
I like the Pioneers for the price, they are very well made and thought out speakers, next price bracket up would be Ascend acoustics 340se front stage and 200 surrounds, but this is over $1000 and then I like them all the way up to a $2200+ budget where there are a few more options including wharfedale diamonds, kef, psb, ascend sierra, Focal, ect... But for your price range the series 2 pioneers are the best hands down... And they are easy to drive so your avr should be just fine...