I haven't used one but going strictly from brand quality and feedback I'd look at the
Onkyo TX-SR605 (the real price is $399) receiver or maybe better yet the
Pioneer VSX-1017TXV-K for $349. I have an older version and the Pioneer will do everything that you want to do and then some.
Then if budget allows grab the deal of a lifetime on Boston Acoustics speakers.
A pair of
VR3 towers will rock you world
A
VRC center is the perfect compliment
A set of VRX surrounds are the best way to go for surrounds but
CR57s ($70/pr) will do the trick if money is tight.
Think of the speakers as a 10-15 year investment that will flat blow your friends away.