Get a nice mid-range stereo receiver from Crutchfield. Yamaha is always a good working, not too high end, but not too low end, receiver. Shouldn't cost more than $200 for what you'll probably want or need. The new receivers will have all, or should have all the new digital video and audio ports you will need.

Invest in a good set of speakers. Something like a 5 or 6 set of speakers. Two front, one middle, two surround, and one subwoofer. Again, doesn't have to be very costly.

You should look at both the Plasma and LCD screens on a side by side comparison. Best way to do that is to go to places like Costco, BestBuy, etc. I'd think a nice 40" TV would fit your needs well and those really won't break the bank. Look at the Sony 40" LCD and an equivalent branded Plasma. In the long run, I'd think the LCD's will be cheaper to maintain and to get repaired over a plasma. Just my O2.

Finally, you need the "accessories". IE, get a Blu-Ray DVD player. Now that you have the stereo, speakers, and a high definition TV, you'll want to watch your new DVD movies in HiDef. Interestingly, I saw that the best review on a Blu-Ray DVD player came in the form of the Sony Playstation. Heck, now you get a cool game system with awesome high definition graphics + a Blu-Ray DVD player.

Lastly, upgrade your cable or satellite service to HD. No point in owning all this great stuff if you aren't going to actually watch HD TV. Comcast offers a DVR (Digital Video Recorder) for a few duckets more. Or, if you're like me and don't care for the hardware and software of the Comcrap DVR, I opted for a Tivo3 HD and a lifetime service contract. Got a couple of cable cards from the cable company, and I was in business.

Now, if I could do it all over again, I'd flush-mount all my speakers in the ceilings and walls, as well as "upgrade" my rear-projection TV to a flat panel LCD. I'd make a small case for the the receiver, DVD player, and the Tivo. Nice, compact, no exposed speakers, etc.