With that budget, do not look at new gear. You should be looking for used gear on e-bay.
Why do I say this? I am coming to you with over thirty years of experience in the hobby of primarily stereo and now HT systems. Most hobbyists are very, very finicky. What does that mean? It means they buy expensive stuff, play with it for a while and then sell it, so they can buy other new stuff. What that means for you is that there is a huge market for the resale of this equipment.
This hobby is a kind of addiction. At this moment, I have four amplifiers, two receivers, a couple of pre-amps, and five different sets of speakers. Assorted speaker cables, and interconnects. Can I play with them all? No. But I do have two HT systems in the house and the makings of a third stereo sytem for my office. I tell you this not to pat myself on the back, but to tell you I am speaking from experience.
If you look on e-bay, you will find gear that will be better than what you can buy new in the stores and still be within your budget. When you shop there, you have to know what you want first. Then you have to be careful that you are buying from a seller who has done numerous transactions and has a high positive rating from other e-bayers. Each e-bayer gets rated by everyone who does business with him/her. Don't buy from someone with more than a few negative feedbacks. Everyone will run into someone who is hard to please now and then, but you want to steer clear of someone with a lot of negatives in his/her feedbacks.
Another thing to consider is looking at e-bayers who are in your geographic area, so you can pick up items you buy and pay in person, that way you can meet your seller and you know where to go, if there's a problem later. All that being said, you can buy some really great stuff without the retail mark-up that the stores have to charge to stay in business.
It will be too expensive to go with separates (meaning separate amps, pre-amps and/or processors. You will want a receiver and a source player for your cds, and dvds, and speakers.
Personally, I recommend people to the Pioneer Elite line of receivers. The systems bring with them what Pioneer calls the MCACC, which is a microphone that attaches to the receiver. You place the microphone in your preferred listening position and the system adjusts itself to optimize sound projected to the listening sweet spot. As anyone who plays with this stuff will tell you, optimizing speaker placement is complicated. This gadget makes it easy!! The amps are sweet and strong enough to drive just about any load. Right now I am playing Martin Logan Ascents electrostatic speakers on my Pioneer. These are 4 ohm speakers (not 8 ohm, which is standard) and they require lots of power to make them shine. They are great speakers and I am happy with the soundstaging and imaging produced through them with this receiver.
There are lots of great source players. The best ones will be out of your price range, but you can upgrade later. Again, Pioneer's Elite line is a favorite of mine in your price range, especially if you take my advice and go pre-owned. This line plays most of the formats out there, including SACD, DVD-A, stuff you can burn on your computer.
Speakers are a VERY personal choice. You have to listen. listen and listen some more until you find what is pleasing to your ears. They are your ears, afterall. You should buy some audiophile quality recordings and go to your local high end stereo store. Listen to speakers you consider about 30% - 50% over your price point. Once you find what you like, you'll be able to buy what you want within your price range on e-bay. While this area is very personal, I would recommend that you consider the following: Paradigm Reference Studio 20s or 40s, PSB's line of bookshelf speakers, and B&W DM601s or 602s and the CDM line (if you can find some older B&W Matrix 805s with an HTM center in your price range
grab them.) Most people who have this type pf equipment will not have abused it, since it was expensive when purchased.
You'll also need a subwoofer, since these speakers are going to produce quality mids and highs, but they will not reproduce much in the lower frequencies. Those are the thumps and booms that thrill in the movies and the bass in your music. In this area I recommend Velodyne subwoofers. See if you can find an older model F-series, which is servo-controlled. These are very musical subs. New, they'd be too expensive, but you can get some nice ones used.
Other contributers have suggested Hsu speakers. Dr. Hsu's gear is top notch. You'll find no argument from me on that point.
Many real high end stores have resale departments, where they sell stuff that's been traded in and also things being offered for their customers on consignment. Often, these stores have repair departments and thus they can service what they sell.
Other used gear can be found through Audiogon.com and audioreview.com and refurbdepot.com
Have fun and good hunting.