Studio monitors will fit into budget easily. Are you ok without having grilles?
If grilles are a must, an idea comes to mind, of course it's only 1 out of a million possibilities.
3x Ascend 170SE. (use identical speaker as center for best possible performance). If you can do any of the following, please do so: upright, same plane as mains, equidistant is icing on the cake. ~$500.
http://www.ascendacoustics.com/pages/products/speakers/cbm170/cbm170.html
Outlaw Audio LFM1 Compact subwoofer, sale ends in three days, $319, free shipping. (if you can extend budget at this very moment, the sub is where I'd throw extra cash; either LFM1 Plus or the EX).
http://www.outlawaudio.com/products/lfmcompact.html
Skimp at the receiver. If you must demand access to mch pcm over hdmi, then here is a list of superceded receivers that can do that. Won't accept the bitstream versions of lossless ht codecs. Granted, many will be impossible to find.
Onkyo 604
Marantz 4001
Yamaha 661
Yamaha HTR-6060
HK 247
Panasonic XR57
Sony STR-DG810
Denon 887
Denon 1908CI
Denon 788
Denon 2308CI
However, to keep within the budget for now, I say forget HDMI audio altogether. I can tell you, from personal experience, speaker improvements have about 100000x more impact than the difference between lossy and lossless codecs. Also, since the processors/receivers supercede faster than pretty much ANYTHING else in the world of AV, you can upgrade that in a couple of years.
That said, here is one 5.1 receiver, that handles dd/dts for $211.
http://www.amazon.com/Harman-Kardon-AVR-154-5-1-Channel-Receiver/dp/B0016BN5CM/ref=sr_1_5?ie=UTF8&s=electronics&qid=1254086690&sr=1-5
cue Mastercard advertisement
3.1 system: $1,050.
Getting a system based on Ascend Acoustics, Outlaw Audio, and Harmon Kardon over an HTIB: Priceless.
Lastly, if only as a crutch for a year or two, pick up some super cheapo garage sale speakers for the surrounds, if only for the time being. If your budget expands due to all the help you receive here, and you do go with Ascend, add a pair htm 200s for $278 minus the package discount they give you.