Ok, thank you guys. That yamaha looks great. I may be willing to up my budget, if the difference is enough. Assuming I get that receiver, what am I looking at for a decent set of speakers?
Define "decent". For some time, I was running a receiver that retailed for about $600 with speakers that retailed for over $6000. I have since replaced the receiver with something that retails for about $1600 because I wanted more features, but it sounds the same as the less expensive receiver. Given your starting budget, I doubt you will want to go that high, but basically the more you are willing to spend on speakers, the better you can get, at least until you get up to a few thousand dollars. The moral to the story, in case you have missed it, is that the receiver matters far less for sound quality than the speakers. The receiver recommended to you is one that I would be fine with, used with my speakers. But if you were willing to give up HDMI (and the new audio formats on Blu-Ray), you could buy a used receiver that should otherwise sound just as good for about $100 and spend the saved money on better speakers. At your price point, extra money on speakers will get you very noticeably better sound. However, you must decide what you value most.
It has been too long since I looked at speakers costing close to your price range, so I will leave it to others to make suggestions for you. For example, the cheapest subwoofer I would recommend would cost about $429 plus shipping. And then you would still need the 5 speakers. So that isn't likely to be overly helpful.
In case you are curious about the "budget" subwoofer I would recommend:
http://www.svsound.com/products-sub-box-10nsd.cfm
Basically, what you should do, is go to some audio shops in your area, and listen to as many inexpensive speakers as you can, priced up to the highest you are willing to pay. No speaker is perfect (especially in your price range), and only you can decide which virtues and which vices are important to you. Do remember, eventually, you will end up with a subwoofer, so none of your other speakers need to go much below 80 Hz. A -3 dB point of 60 Hz would be excellent, as you should undoubtedly use the bass management in the receiver to send all the deep bass to your subwoofer (when you get one).
If you are willing to buy only some speakers now, and save money for the rest later on, that would be a reasonable thing to do. Just make sure you end up with all three front speakers matching each other, so that when something moves across your screen, the sound does not change tonal quality when it moves across the front.
