As far as a receiver goes, you really can't beat the new Onkyo TX-SR805, it's a THX Ultra 2 certified receiver for just a little over $1000, nothing in it's price range can touch it. But I really don't think you need all the features that receiver offers, so save some money and steup down a notch or two and put that towards better speakers and sub. Even though it can upscale SD, it can't create HD from an SD source, so if you want optimal picture quality, you will have to go with an HD package from your sattelite provider.
And for a DVD player, the Oppos are about as good as it gets until you step up to either BluRay or HD-DVD, and I'm not buying either until the format war is over.
As for setting up your display, get a copy of Avia and run through it's video calibration section and you should be good to go.