Well first off, welcome to the forum.
Theres a whole lot of ways you can go about doing this and none of them are right or wrong, its about what is right for you. Sounds like you want to upgrade from the home theater in a box.
If I were in your shoes I would consider doing speakers first and foremost. The speakers are going to make the largest difference in audio quality out of anything you purchase. A new receiver plugged into the old speakers wont really sound any better than the original one that came with the speakers because the speakers in those sets aren't very good.
#1 Reason why not to buy receiver first in your situation
Consider this, you buy a new receiver and plug the old speakers into it and it doesn't really change anything except the fact that you can route HDMI and your other components through it. Now by the time "late 09" rolls around and you are ready to buy speakers you see the same receiver you have on sale for $150.00 cheaper or you see that you could have gotten a significantly better receiver for the same price. Lesson is that electronics prices drop fast and 6 months is a lifetime when it comes to prices.
So, if you really really want to get the ball rolling now then I suggest considering the $1700 you have listed as your end budget. Its a shame I think you just missed the EMP speaker package sale because that would have been perfect for you, but I'm sure the other guys can lend some advice for deals in your price range.
Best of luck, and remember to just be paitent and do the research and avoid the impulse buy (I wish I did when I was in your shoes)
Wow, thanks for all the quick reply's. I don't necessarily have a big issue with the sound quality at this point, it is more an issue with being able to get surround sound easily out of my PS3 and Direct TV with out having to manually change the RCA cords each time. If I had any argument on sound quality at this point it would be the lack of bass my sub produces.
So I guess I should state at this point, my number one priority is to have the ability to switch audio inputs. Maybe there is a cost effective solution to this that would allow me to keep my current receiver and do the upgrade on the speakers??
Also, here are the stats on my speakers, not sure if this will help or not....
RMS Output Power: Dolby Digital Mode
Front Ch 250 W per channel (6 ≠), 1 kHz, 10 % THD
Surround Ch 100 W per channel (4 ≠), 1 kHz, 10 % THD
Center Ch 250 W per channel (6 ≠), 1 kHz, 10 % THD
Subwoofer Ch 250 W per channel (6 ≠), 100 Hz, 10 % THD
Total RMS Dolby Digital mode power 1200 W
FTC Output Power: Dolby Digital Mode
Front Ch 104 W per channel (6 ≠), 120 Hz–20 kHz, 1 % THD
Surround Ch 34 W per channel (4 ≠), 120 Hz–20 kHz, 1 % THD
Center Ch 101 W per channel (6 ≠), 120 Hz–20 kHz, 1 % THD
Subwoofer Ch 95 W per channel (6 ≠), 45 Hz–120 Hz, 1 % THD
Total FTC Dolby Digital mode power 472 W
Thanks Again for the support,
Josh