You don't have to be an audiophile to enjoy good sound.
What you may find is that the more money you start spending on things, the more you're going to look for in sound quality, because who wants to spend their hard-earned $$ on junk that they will end up not liking?
Still, with that said, sounds like you want to keep it basic. I'd say any receiver in the price range you're looking for is going to be adequate. Yamahas and HK always seem to review quite well in the $300-$350 range. One thing you can keep in mind is upgrade ability for later on down the road if say, you do decide to get that Blu-ray player, or decide to use HDMI switching for your components, get 7.1, etc.
HDMI is not necessary if you have a standard DVD player, and it most likely does not have a connection as such. Try to stay with the superior connection as much as you can, providing all your components support it.
In this order:
HDMI or DVI
Component video - Y, Pr, Pb
Composite - the single yellow video connection
As for audio - digital always works best and is the simplest to hook up. Optical or digital coax is fairly equivalent in most applications. It is essential if you want true surround sound format to be input into your 5.1(7.1) receiver, unless you plan on using discreet 6 channel input.
I'm sure someone will post some links up here for you in a bit, so stand by.
The audiophile bug is easy to catch, so watch out.