If you do some judicious shopping, you can get a good starter system by buying entry level separates. Separates are desireable because you can add on to them where as with a HTiB, you are pretty much limited to what can be attached to it. Especially in that price range. I got the following for my bedroom:
While this system is about 60 bucks more than you want to spend, you don't have to spend that much on the DVD player. I wanted a combo because of the large VHS movie collection I have. Shave about 60 bucks off the DVD player and you should be able to come in just about where you want to be. The receiver does not have component or S-Video switching and only has spring connectors for the speakers, but for the price it is a lot of receiver. It does have one optical digital input and two coaxial digital inputs. I actually got my receiver for $79.99 at www.outpost.com but they are always out of stock on it. It can be had however for the $125.00 I mentioned at Circuit City. The performance of the receiver impressed me so much that I went ahead and bought a second one for my den. I paid the same as I paid at outpost because Circuit City agreed to price match the unit.