Home Theater vs Hi Fi ~$500

I'm moving into a new place and I'm starting from scratch on everything. Meaning, I need everything. I'm on a limited budget though. I'm looking at spending around $900-1000 on the TV and hopefully less than $500 on the rest. I'm getting really stuck on what to do about the DVD/audio/receiver side of things. As soon as you start looking at anything hi-fi your minimum price gets around $500 and that doesn't even include the DVD player or cables or anything. So I'm wondering what I really need.

I'm primarily using this for movies and music. I know that for music, hi-fi is way better, but again its a balance of price and performance. I guess examples of what I'm currently looking at could be...

Home Theater:

Hi-fi Home Theater:

With the Hi-fi one I'd have to throw in a $100 blu ray player too, so that ups the cost. I'm pretty lost on this home theater stuff, so any advice is really appreciated.

P.S. I'm in Australia, so stuff is a lot more expensive than in the states.
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  1. It's usually cheaper to upgrade a PC computer as a multimedia center, for example, I installed a blu ray drive for $70, bought a $5 HDMI cable, and plugged it into the existing TV.
    There's quite a bit you can do at a lower cost, compared to buying new equipment...
    The computer I have already has surround outputs, which can be connected to powered speakers and subwoofer.
    Buying a 24" computer monitor, instead of a TV, works pretty darn well for movies, etc...
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