I put together an amazing system for around $1000 last year, but $550 of that was for the receiver. So if you go with a slightly lesser receiver than the Onkyo TX-SR804 that I went with: http://www.amazon.com/gp/product/B000J40PMK

It's certainly do-able.

I suggest going the Mail Order route from Amazon. I am an authorized dealer for Pinnacle, JBL, Acoustic Research, NXG Technology, Phoenix Gold, Bic and a few other brands.

My speaker system is composed of:

Bic V-1220 430W Sub - $159.99
Bic DV-62CLRS 2 way 175w Center - $86.99
Bic DV-62SIB 2 way 150w Front Channels - $96.99/pair
Discontinued Bic Rears, but similar in spec to the Bic DV-32W - 2 way 125w - $45.99/pair

So total cost of that speaker package is: $389.96

Bic is made by Klipsch Audio Technologies who make some serious high end gear. Bic being pretty much entry level - but a highly awarded brand in itself.

The above prices are wholesale excluding shipping. If you want a more detailed quote or have your eye on speakers from any of the manufacturers I listed then let me know.

Or for the simple option - $380 buys you a nice JBL 5.1 set: http://www.amazon.com/JBL-CS480BG-Comple...99223434&sr=8-6

Combined with something like the Onkyo TX-505 for $250 and you are just over budget.
http://www.amazon.com/Onkyo-TX-SR505-Cha...99223434&sr=8-6