if your looking for advanced and better sound then its dependent on your sound card and how much your willing to pay, but for a simple low cost approach a decent 5.1 sound system should do the trick and they can be found cheap at lots of places.
not too sure as I've never really looked into them, however sound blasters seem highly recommended and with that budget (£?/$?) you should be good for both a decent 7.1 sound card and a decent 7.1 PC speaker set.
again play.com can supply both but not sure if they will be the cheapest around, im sure youll be able to find it abit cheaper if you look around on the net.
I've had good luck with Logitech 2.1 speaker set ups, Altec-Lansing also has some decent 2.1 set ups. For strictly music I prefer the less cluttered 2.1 sets instead of having a surround set up and wires everywhere.
I have an early set of Z series Logitech 2.1s that were plenty for normal PC music listening, something similar should run around $75. I got a THX certified set since then that have plenty of power and bass. The THX sets are around $200.
I've always used the onboard sound, and the Gigabyte Z77-UD3H I currently have supports 7.1 surround and has some other fancier outputs as well. I don't think you'd get much benefit out of a sound card unless you were doing professional editing and using a fairly high end sound card and speaker set-up (which would be more than your budget I think)