Hi, I'm in exactly your same position. Right now I'm having an extension built that will have a 16' X 21' room specifically for my HT. I would recommend a projector TV without question. You don't have to spend 5k to get a good projector. I have researched them and two come to mind in the 2k class that are superior. One is the Panasonic PT-L500U. This projector is designed specifically for HT use and has a 16/9 aspect ratio. The other is the Sanyo PLV-Z2 also made with 16/9 aspect. A good screen for a 100" picture can run you a grand, but the good thing is that it doesn't wear out, so you'll have it forever.

Total so far $3k

Your going to want a good receiver. If you budget about 3k, you can have one of the top ones available for the manufacturer of your choice. My Recommendation is the Pioneer VSX-49TXi. Separates are also an option, but I would not recommend it just for the fact that your on a budget, and separates will eat up a lot of it.

total so far $6k

For me it's the speakers where you want to spend a good portion of your budget on. My HT system uses about 3k worth of speakers, and your budget will allow you the same. Magnepan has just won an award at the years CES for their new HT system. The panels actually fold flat against the wall when not in use. Very space effective!

total so far $9k

DVD/CD/SACD/DVD-Audio player can be an all-in-one. The recommendation here is for the Pioneer PIONEER ELITE DV-47Ai. This player has the ability to deliver the signal to the receiver using a broadband digital link. Very well constructed, also a 2 year warrantee. Cost $750

In addition a must have is a Pioneer DVR-810H-S. This Digital Video Recorder has a 80gig hard drive, burns DVD's, and also includes basic TiVo, and replaces all the functions of a VCR. Cost 1k.

Total so far $10,750

I've left you $1250 to spend on other things like cables, stands, wall treatments, ect.

Good luck!