My dilema has been trying to establish as to what an AV receiver/ home cinema receiver does.
Do the normal speaker cables simply fit into the back of the reciever?
Can i connect, VHS, DVD, TV and satellite TV's to a receiver so that you can get 5.1 surround sound from all of them?
"Normal speaker cables" do fit into the back of the receiver and is used [duh] to connect the receiver to your speakers.
Your VHS won't support 5.1 audio. You only get 5.1 [or better] from DVD / BluRay / XBox or similar items.
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For receivers I suggest that you look over what "rnatalli" indicated.
To summarize the receiver is the heart of your AV system. A good receiver for you will allow you to plug in the video & audio outputs from everything that you want to watch into it ... DVD / BluRay / XBox / VHS / etc. should all be able to connect to the receiver at the same time. These are your "sources".
NOTE: You want to use the best quality source available to you ... HDMI, Component, SVideo, and finally Composite are generally the best video connection types [in order]. Audio wise HDMI, optical, or digital coax are all fine ....
only use RCA if the signal is 2.0 (like a VHS player) ... you really want to use one of the other types of "audio out" if possible.
The "outputs" of the receiver run to your speakers and your TV. The receiver will power your speakers and tell them what to play.
My advice for shopping for a receiver is to make it your last purchase [not counting cables]. This way you'll know what you need to connect, how many connectors, and what sort of speakers that you need to drive from the unit.
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As far as speakers I have to agree with "avaserfi". For an in-store listening test take your own CDs and/or Movies to listen to. The listening material that you take should stress the speakers on high, mids, and low-mids. Make sure that your listening material has a lot of detail in it and then listen for those details to see if the speakers reproduce it well.
If you can arrange an in-home demo as a last step then that's great [you'll need an appropriate receiver first] because speakers likely will sound different in-store vs. in-home.
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If you post a budget and let us know what you want to do then we'll give you the best advice that we can.