[acropolite (Phil)]

Andrew, my suggestion would be to keep an eye on ebay for a second Hand Yamaha RX-V home theatre receiver. They usually sell on ebay for a small fraction of their original price at auction. Yamaha make very good home theatre amps, they are feature rich, well made and have excellent DSP's
There's an RX-V 457 on eBay (search for Yamaha RX-V) with only 2 bids atm, the highest bid is $5.50 with 2 days to go. I'd be surprised if it fetches much over $100. There's another at a buy it now price of just $80.
It's worth researching a bit before buying, some have later and better decoding options as well as HDMi inputs etc.

That would leave you with a couple of hundred to find some better quality second hand speakers as Andrew suggested.

If you get main fronts of decent quality then little else matters, if the fronts have decent bass response then you can do without a subwoofer, the centre can be simulated, only the surround rears are really necessary for nice effects.
The surround speakers are basically just for effect and the difference between high quality and low isn't that noticeable, I originally had a set of cheap DSE boxes as rears ($80 the pair), I really couldn't hear any significant difference when I replaced the rear surrounds with B&W 602,s which cost 10x the price.