In a 10x10 room, definitely go for a pair of bookshelf speakers and a subwoofer, not tower speakers. If possible I would try to avoid the typical horizontal center speaker in favor of a upright bookshelf speaker for the center. If you like big bass, I would go with a 15" subwoofer like
this one. If you don't need really powerful bass, I would go for
this one. Once you determine how you like your bass, that will determine how much you can spend on speakers. For a two channel setup in your budget, a pair I really like are the
Revel M16s. Those are really top notch for the money. I think a pair of
Sierra 1s would be good too. Although they have not been released yet, I am liking everything I see about the
CCB-8s, for something with a little bit more dynamic range. For a center channel, I would just add another one of those later. For a receiver, I would go for something from Marantz, Yamaha, or Denon. They will all be good for any music application, and have more than enough amplification for a 10x10 room.