a big factor in home theater setups is also the size of the place. are you in an apartment? do you have to worry about neighbors? is this in a bedroom, or a very open space like a living room? these are pretty big factors.
if you are looking for good 5.1 surround. please avoid home theater in a box setups if you can. if you are putting this in a bedroom or a room thats not big. you shouldnt have to worry about how much power the receiver cranks. besides, theres no real good accurate way to measure watts, so most receiver manufacturers grossly inflate their numbers to sound better to the consumer who likes to see big numbers.
also like others mention, just build yourself a home theater set and work your way up. look out for good deals on speakers. they are out there. do your homework for sure.
but if you are really strapped for cash. i think receivers like the harman kardon av147 ($400) and 247 ($500) models are pretty good. i put a 147 in my bedroom and that thing is a fucking champ. paired up with some polk RM6750 5.1 satellite speakers. these speakers generally retail for 500bucks. but places liek frys electronics usually put them on sale for 200 bucks, a lot. thats how i scored mine. plus i bought my hk av147 receiver off ebay from an authorized hk seller for 200bucks shipped, brand new. so definitely start on ebay if you want to go that route with receivers. the 147 only outputs a measly 45watts per channel in 5.1 mode. but when the room isnt ginormous, that shit dont even matter,. i blast my system playing movies and games and it performs wonderfully.
downside to a 147 is the hdmi ports dont carry audio. so you have to have audio go thru a fiber optic port, digital coax port, or standard stereo jacks. also the receiver doesnt have a video scaler, so you wouldnt be able to plug in an old progressive scan dvd player into the receiver, and out it to 1080P quality upconversion. itll display, it jsut wont upscan the image quality. but if all your stuff being used on your tv is HD enabled (360, ps3, hd dvd, blu ray, dvd with hdmi and upconversion), then this feature is irrelevant. this one is also just a 5.1 receiver, not a 7.1 receiver. so all the new blu ray and hd dvd lossless audio formats (dolby true HD and DTS HD) are not supported. but youll still have the standard dolby digital 5.1 and dts 5.1.
if those features are important, you may want to upgrade and get maybe a pioneer elite VSX series, an HK AV347 or an onkyo 805 THX series. not sure if the lower priced 605 does DTS HD or dolby HD. but either way, this is where its a lot more pricey. i got an onkyo 805 in my living room with some mirage surround speakers. man that receiver is a fucking monster. not to mention it weighs a ton. only downside is that it runs pretty damn hot. but i purchased a cooling kit for like 20+ bucks to cool it down.
in the end, do a lot of research. dont be blinded by simple watts power outtage stats. shit usually means nothing, most of the time, since its usually not accurate. and just think about the features you want.