Considering your budget...
I'd recommend a receiver, dvd player for cd's, and speakers. I'd pick a stereo setup over home theater due to your budget but if you think you'll eventually go to ht down the line then I'd get an ht receiver and use it in stereo until I could afford a full set of ht speakers. Assuming a stereo setup with new equipment my picks would be the following: 1) For a receiver look at Onkyo TX8211 or 8511, Denon DRA-295 or 395 and Harmon Kardon HK3380 or 3480. 2) I'd pick a dvd player for the cost savings. You can get very good sound from introductory units from companies like Sony, JVC, Panasonic, Toshiba etc. You can try a more expensive cdp down the road if you wish but going the less expensive route now will leave you more money for speakers. 3) In speakers you have a wealth of choices so I'll just mention a few bookshelf size models (you may need some stands for these if you don't plan to put them on something you already have). Take a look at B&W 601 S3, PSB Image B25, Paradigm Mini Monitors, Boston Acoustics VRB, and Epos ELS3(I think that's the number) for starters.
Take your time in making your choices and think about the features you need and don't need in electronics and audition a lot of speakers to get an idea of the sound that suits you best. Make sure you can return things that don't satisfy you when you get them home. I'm sure the other folks here will have some good ideas but, hopefully, this will provide a starting point. Good luck and have a great time!
Gary
2 channel vs. home theater
You need to decide if you want stereo music or home theater. My personal recommendations would be quite different for each. There must be many people with more expertise at this price point than I have, keep pushing them to speak up.
Stereo;
If you already own a CD player assume you will want to upgrade at some future date and then buy an integrated amplifier probably witout a tuner (you can add one later for satellite or FM). There are some decent brands: Harmon Kardon, Marantz, NAD etc for around $300 used, Spend the rest on 2 decent speakers, maybe you can find a pair of used Vandersteens or Snells. At this price point you can only minimize weaknesses not consolidate strengths, both Vandesteen and Snell have a little of that midrange magic without screwing up the rest of the spectrum.
Home Theater:
Buy a receiver; you wont get great sound at this price, but acceptable is possible. You will have to settle for an inexpensive DVD and CD combo unit. The problem here is the need for 5 speakers. Many people stress the importance of matched, at a higher price point matching may be less important but at the money you are talking about I would guess Boston Accoustics is a good bet with Mission as a second possibility.
Onkyo and Denon continue to be popular, I bought a mid priced Denon years ago and found it not to my liking, all Denons I've ever heard suffer from the solid state diseases of hardness and glare, perhaps not as badly as the mass market receivers. I went to a Cambridge demo room a few years back expecting a lot and came away quite dissapointed maybe their stuff has gotten better.
My home theater is NAD, while it can't compare to my expensive stereo set-up the NAD trades a sound that is too sharp for one that is somewhat muddled, more of a sin of ommision, it has low listener fatigue and does a great job on movies.