I am a bit disappointed in some of the suggestions as of lately. In no way should he be settling for the Z-5500's. Evan a marginally cheap set of bookshelf speakers like the insignias sound better than anything Logitech can produce.
If you want to have something better than a HTiB, then I would most definitely start out with a 2.0 or 2.1 setup. You will be so much happier in the long run.
As far as the onkyo speakers on ebay, well they sound ok at best, but In general Onkyo is not great at making speakers.
I would start with some Energy C-50's
they are right up your ally. And most importantly they produce shockingly good sound. Their is also the C-100 if you want to spend a little more. Starting small is not always a bad thing.
Probably the two best starter subs you are going to find are going to be the Energy ESW-8
, and the Polk PSW10
. These Are very solid, and cheap subs to get anyone started. As your tastes develope you can move into the midrangen and get something like a PA-120
. Many people refer to this amp as well as its older model the BIC H-100 to be among the best bang for the buck available.
Part 2: The receiver and you!
Now due to your low budget you are not going to get an amazing receiver that decodes any kind of HD audio. BUT, you can start off strong. On the low end you have the Onkyo HT-R557
. It only does video switchingthrough the HDMI ports, but you can just feed a coax or optical to the receiver and get your audio. It is nothing fancy. But I promise if you pair that with some Energy C-50's you will be much happier than going HTiB or Logitech.
Then when it comes time, and you have that itch to buy a real receiver you can dip your toe in with the Onkyo TX-SR606
. This will allow you to do anything you will ever want to. That is unless you want pre-outs for an external amp. But given the situation that should not be a concern.
I almost forgot. One option that is better than any of the options above for speakers/receiver is the Harman Audio eBay Store
. All the speakers and receivers on their are better than anything I listed (Minus the PA120, and Onkyo 606). Not only is this gear better but it offers a full warranty so have no fear! The receivers they have listed are outstanding. And if you did not know Infinity Speakers sound great.
Please not that there are hundreds of possible combos and components that you have to choose from, and I chose the ones that I did because those are the ones that I either have experience with, or know a lot about. I could list more, but this should be good for your needs. If you have any questions about anything please ask.Edited by SilkRoad - 2/21/09 at 5:23pm