Hmm...you're going to have a hard time filling that room with decent sound on that kind of a budget. I'm not trying to rip on you, but in the $1000 and under catagory, spending an extra $100 can make a world of difference. I would say that you should try to stretch out your budget a few hundred. You can do a lot under $1000, but I really don't think you'll be satisfied with the KLH system.
Here's what I would recommend for a KILLER system that you should be happy with for years:
2 Pairs BIC DV62SIB Bookshelves from
X-10: $248.98 shipped
1 BIC DV62CLR Center from
X-10: $104.49 Shipped
1 BIC V1220 Subwoofer from
X-10: $190.99 shipped.
Pioneer VSX-815K receiver from
J&R: $249.99 Shipped
Grand Total: $794.45 shipped.
OMG THAT'S SO EXPENSIVE! Not really...and the performance will be levels above the KLH system you were looking at. Yes, the price is higher. But I think you can save up for a little while longer and afford this system. The only thing not included is cables. $50 at Home Depot should take care of that.
If you are set on the KLH system though, I think you should look at getting a Refurb H&K AVR-135 off of eBay. They should be in your price range. Another option would be an entry-level Onkyo. Still, if you CAN wait and afford them system I've priced out, then GO FOR IT.