The first thing you want to do is set a budget for how much you will spend. If your budget is $1,200 for the whole system, then plan to spend that much. If you really only want to spend $1,000, then say so - and plan to spend it.
You can get cheapie HTIB systems, like that Panasonic, for less than $300 - even around $100 for some. They generally use speakers that are no better, and sometimes worse than the ones in your TV. They are also, quite often, not using traditional A/V receiver connections, and are impossible to upgrade - and very likely to break.
It should be noted that Denon and most other major manufacturers rate the Total Harmonic Distortion (THD) level at about .1% or less.
For example:
http://usa.denon.com/ProductDetails/4239.asp
If you go into the "Detailed Specifications" you will find the 75 watt power specification followed by a check box indicatin that THD is rated at .08%.
1% is typically a maximum THD rating in most magazine reviews - and is high.
.1% is typical for what many would consider a measurement of power.
As well, power is typically rated with only two channels driven instead of all 5 or 7 channels.
At $1,000 you likely can find some decent separate systems using Onkyo, Yamaha, Pioneer, or Denon A/V receivers and some speakers. If you really want to stick with a home theater in a box (HTiB), then one of my favorites tends to be Onkyo with this...
http://www.us.onkyo.com/model.cfm?m=HT-S7100&class=Systems&p=i
Under $1,000 always, typically well under (look online for deals) and compatible with the new HD audio formats from Blu-ray. As well, a zone 2 output (powered) if you want to put an extra pair of speakers in another room (deck/kitchen).
The best part really is that you can switch out the speakers at a later date if you want to upgrade quality - and you can keep the same A/V receiver.
Note: The Onkyo is rated at 130WPC at .08% THD. Far - FAR superior to the Panasonic you reference.
