For around $500, the Pioneer HTP-725DV can't be beat simply for the Receiver and DVD Player you get. For as low as $520 online you get the following:
Pioneer VSX-D811S receiver Pioneer DV-656A DVD-Video/Audio player 6 Pioneer Sat speakers and a 100w sub
The speakers and sub are the weak point of this system, as is the case of 90% of HTIBs out there. The sub in the kenwood HTIBs would be a bit better than the pioneer, but the speakers are probably worse.
The great thing about this package is that the receiver and dvd-video/audio player together would cost you as much as the package, w/out the speakers/sub. Essentially you're getting the speakers and sub for free. The speakers and sub are good enough for someone getting started in HT, and can be upgraded down the road if you see fit.
The receiver and dvd-video/audio player, however, are very good pieces of equipment that will last you a long while. They support all of the latest formats including DD-EX and DTS-ES, DPLII, NEO:6, Progressive Scan DVD, and DVD-Audio. The package also includes 6 sat speakers, so you'll have a 6.1 setup right out of the box.
If I were buying a mid-entry level package right now, this is what i would get. If I were buying a mid-entry level receiver and dvd right now, this is also what i would get, and sell the speakers on ebay (you could get at least $100 out of them).
If the $500 limit is set in stone, you can get the HTP-720DV package. The only difference is a downgrade in the DVD player, which doesn't support progressive scan or dvd-audio. If you don't need the DVD player at all, go with the 720DV and sell the DVD player on ebay for around $80. If you have a player that's not progressive scan/DVD-Audio capable and you want one, get the 725DV and sell your current player.
I would actually buy the components separate and get good ones in each class. For $500, this is a good way to go:
* JBL NSP-1 speaker setup for ~$220. (4 satellites, a center, and a sub) This is maybe the best low cost speaker package available right now, great sound for that small price.
* A Denon 1802 or Harman Kardon AVR120 for ~$250. Very solid receivers for the price/performance.
* If you need a DVD player, get a Panasonic RP56, 62, or 82 for $120 - $200.
It puts you a little over $500, but it also makes sure you're entire setup is decent. HT in a box units are notorious for having one great part and one or two so-so components. By spending a touch more for components, you get a heck of a better deal (IMHO).
Only problem is that the JBL set doesn't come with a sub. If you have a K's Merchandise near, the 12" Sony sub is on sale for like $129 or $139. Good deal to go with the NSP set. Maybe a little over budget, but much better than a HT in a box. I'd go with a refurbished Harman Kardon AVR 120 from harmanaudio.com for like $215 shipped. I just got one and it's a terrific little receiver for the money. Couple that with the nsp set for $230 or so and your at about $585 or so for a system that smokes a HT in a box IMHO. Later.
The Pioneer package i mentioned is worth what you pay for just the receiver and dvd. The speakers are pretty much a bonus, and will get you by if/until you decide to upgrade. At that point, the NSP1 and Sony sub would be my recommendations. I used the NSP1 package along w/ some N28s in a 7.1 setup w/ the 811S for about a month, then upgraded to the 1803 (free upgrade through a friend, long story). While the 1803 is built more solidly and has a couple of features i like, i HEAR no difference between it and my 811S, and the remote is horrible.
Also, the low end HK receivers are very short on features. If you listen to a high percentage of music (40% or more versus HT), then HK makes very good stuff. If you're majority of listening is HT, then HK is not the best way to get the most out of your money. If i were going w/ HK, i'd at least get a model w/ Logic7. I've also never understood why on up the HK line they give you DTS-ES and DD-EX processing, but still don't give you the amplification. It's like they want to advertise it as a feature, but aren't willing to commit to the format.
I had the original Sony dream System and hated it. Sold it a year after I bought it. Most of these systems have single cone speakers with no tweeters. Although some of the newer systems are including them. There were no highs at all and the sub was boomy. Also with sub at the 0 setting it would pop consonants. To get rid of the boom and pop I set my sub to -4. Which was a pretty good balance. Nothing could be done for the lack of highs. Also the center speaker was the same size as the sats and simply could not keep up. Even with the center volume raised. Sony also overrates these systems. They claim 30 wpc. But it was actually 10 wpc. There are no tone controls either.
i would investigate the kenwood or another manufacturer before the Sony.
Umm... the my H/K AVR 120 has Logic 7, Dolby Pro Logic II, Dolby Digital, DTS and binding posts for all speakers. I don't consider it low on features at all.
I do agree that offering the EX formats on H/K's higher models without amplification is odd.
I love my onkyo 650. (although one poster has had problems with Dolby 2 or Dolby surround sources, I have not heard the problems on mine.) The 650 does not have a dvd. The speakers are pretty good - the fronts have two 5" woofers and a tweeter, the center has two 4" woofers and a tweeter, and the surrounds have one 4" woofer and a tweeter. The sub sounds very good to my ears - LOTR is incredible, you can feel it through the couch. If I were shopping today, I would listen to the Onkyo and the Pioneer mentioned above and let my ears decide.
Consumer report recently tested some HTIAB systems, if I remember correctly, the best sounding of the bunch is a Pioneer system which they say lacked features.