if you're looking at $1000 for the whole setup, your best bet is probably a receiver with preamp outputs and 5 channel amp. i'm not sure you'll find a worthy pre/pro for $500. check out audiogon for used gear that is most likely your only chance.
you can't find a decent used DD/DTS 5.1 pre/pro for $500? What about an outlaw 950? maybe you could find one of those used for $500...
As far as a 5 ch. amp, I know Kevin_B is selling an Acurus one here for clost to your price range, or else you could find a parasound 855a (I thik thats the number) in that price range, which i think is 85WX5.
Or...just buy a good $1k receiver. You could get like an HK AVR7200 or 8000, Denon, or a pioneer Elite series.
lowest Outlaw 950 goes used for around $600 shipped. Usually more. Your best bet is a good receiver w/ preouts or older pre/pro like the Marantz units. Some will have DD and DTS but no multi-channel inputs. If you don't need those (for sacd, dvd-audio), you can find a pre/pro w/ dd/dts for around 300-350. I wouldn't buy one w/out multi-channel inputs, though.
yes, I thought of the Sherwood also, then I happened to see two on Audiogon yesterday. I think one is $400 and the other is $450. They even have AC-3 input for laserdiscs. They would be a very good buy.