I think what you should do depends upon what you already own. If you are starting from scratch, then, of course, you will need to buy a receiver (or some separates), but if you already have one, I would not recommend buying a new one at all unless you really need it. Surround receivers are a bit like computers, losing their value with incredible rapidity. It is best to only purchase one when needed, as most likely, within a year or so, one will be able to get something better for the same amount of money.
Also, Midcow2 has a good idea in budgeting more money for the speakers than for the receiver. However, at the prices you are talking about, I would recommend a much higher percentage on speakers than on the receiver. I used to run a receiver that retailed for about $600 with speakers that retailed for over $6,000 (including subwoofers, which, of course, are speakers). It sounded great. Because I wanted more features, I replaced the receiver with something that retails for about $1600. Guess what? It sounds the same, unless I engage a new feature that affects the sound. Granted, if I had needed more power, the newer receiver would sound better (it can put out about twice the power of the other one), but I did not need any more power.
If what you want is good sound, put your money in your speakers.
Additionally, when they come out with some new feature in receivers that you decide that you must have, you will still get the benefit of better speakers when you replace the receiver. In other words, great speakers not only are more significant to the sound of the system, they tend to have more lasting value as well.
