We've just finished assembling our home cinema, running a 42 inch plasma for general viewing use, and a dedicated 90 inch scissor lift screen, using a Sanyo PLV-Z5 HD projector for DVD movies.
We picked up a Panasonic SCHT-880 all in one wife friendly dvd -5.1 DTS Dolby Digital audio-speaker-system, for a very good price about a year ago, and have been really impressed by its audio performance so far. It really crushed a lot of other more expensive branded gear of the same type of configuration, for the money paid it was a bargain., Progressive scanned component video output is standard, I am sure most of the current gear even has HDMI for even better quality video reproduction, which looks great on screens that have the ability to sync with these features.
A review below...
I am sure panasonic, Pioneer, Onkyo and JVC all have pretty similar performing gear in this category, at the time when we purchased, the Panasonic hammered its opposition convincingly, without being extortively expensive..
For the budget you plan on spending, you should get a nice piece of good sounding kit.Make sure that the subwoofer thats supplied with the packaged unit is a front firing driver design though, it really makes a difference between having tight punchy dynamic bass as opposed to floor firing or ported box style subs, which sound very fluffy.
Good luck anyway, you'll love it once you get it all up and running .
Some photo's of our home cinema