You can build a fantastic system for $5,000. Keep in mind that the TV will probably take half of the money.
I know EXACTLY what you are going through. I agonized over my home theater for two years before I finally settled on a system that will make me happy for many years.
I learned everything I could about HDTV, the upcoming Blu-Ray and HD-DVD discs and the over-the-air conversion from analog to digital signals before buying a speaker. I looked at a lot of TVs and discovered what the broadcasters were doing regarding DTV transition. The research drove me crazy, but it saved me a lot of money and frustration.
TVs
The smaller number listed in the resolution will tell you if it is HD capable or not. If the smaller number is equal to or greater than 720, it is HD capable. 1280x720 is the minimum for HD reproduction. If you can hold off on the TV purchase, get a set that has 1920x1080 resolution.
Make sure the TV you choose has an HDMI connection and a built-in ATSC tuner. If the TV does not have those two components, you are wasting money.
You have to determine which is most important to you regarding the display. Is it: image quality,
power consumption,
flat design,
longetivity of the panel,
quiet operation,
price,
overall size,
styling,
ability to handle computer images, DVD, movies and over-the-air broadcasts equally well
All of those were important to me, but I placed the greatest weight on image quality, panel life and ability to handle a wide variety of video inputs without burn-in problems. I chose the Mitsubishi DLP because there is no image burn-in even if the set is on pause for 5 years, the styling is attractive, the power use is low, it is lightweight, and the price was right for the 52" size I received. I gave up flat panel design and quiet operation.
Here is what to consider --
IN MY OPINION:
Plasmas have the best image quality, but they use the most power, get hot and suffer from image burn-in. It is advised that computers not be used with plasmas in a regular basis. Look at 37" Panasonics and Sonys.
LCDs are the most versatile and will probably be your best fit, but you compromise on higher price and reduced image quality. Check out Sharp Aquos 37" and 37" - 42" Sonys.
DLPs can display everything well and the image quality is a notch below plasma, but better than LCD. There is no image burn-in the power use is the same as LCD. Plus, the price is low, especially when you consider 50"+. But, the unit is larger and cannot be wall mounted. The fan to cool the lamp can get loud. Some DLP sets overscan computer images. Plasma and LCD sets don't have this problem.
There is a new technology called SED (Surface Emitting Diode) being developed with Canon and some other company. It promises to deliver breathtaking 1920x1080 images with all the benefits of LCD, plasma and DLP in a thin unit. The only drawback is the initial price of entry. However, because SED sets use the same construction methods of CRT sets, prices are expected to drop rapidly because the sets can be made more reliably and cheaper than LCD or plasma.
RECEIVERS
As for receivers, look at Harmon/Kardon, Yamaha or Denon. Forget about DVI in the receiver. DVI is only for computers these days. HDMI is the standard for video and is included with all new TVs. The HD-DVD and Blu-Ray players will use HDMI because of its superior copy protection and the fact that it will not be licensed for use on computers. HDMI in the receiver may be out of your budget. The $1,299 Denon AVR-3806 is the cheapest receiver I've seen with HDMI switching. It has two HDMI inputs and one HDMI output to the monitor. HDMI carries 1920x1080p HD signals and 8-channel uncompressed digital audio in a single cable.
You can get a DVI-to-HDMI cable for the PC connection, since HDMI is backward compatiable with DVI. Keep in mind that with the PC, you'll only transport the video signal. You'll have to run a separate digital cable for the audio from the PC to the receiver.
Most receivers have DTS-ES or Dolby Digital EX processors built in, so 6.1 sound shouldn't be a problem. Make sure you have 6.1 capability at the minimum.
You never mentioned anything about speakers. The is a matter of personal taste, the size of your room, the receiver you decide on and budget. I would tell you to get a Yamaha Home Theater-In-A-Box system and call it a day, but you want HDMI (DVI) on the receiver.
In short, if you're willing to buy the Denon AVR-3806 receiver for $1299 and hunt down a deal on a 45" Sharp Aquos LC-45GD"n"U LCD TV, and skimp on the speakers, you should be set. Sharp has several models for that 45" LCD TV:
LC-45GD7U
LC-45GD6U
LC-45GD5U
LC-45GD4U
LC-45GX6U
All have 1920x1080 resolution, built in HD tuners and VGA PC inputs. Go to
www.sharpusa.com for more info.
Try running some of this stuff through PriceGrabber.com and Google.com. Why pay full retail when you don't have to.