Exactly what ChrisK just said.... you can start getting really really great sound once you spend over about $2000 though. That is if you are going for a nice Dolby Digital setup. I'll give you some recomendations for the more normal stuff, if you want the incredible expensive stuff, the better listen to ChrisK.
I love Onkyo Receivers are DVD players. For the money they pretty much can't be beat. I currently have an Onkyo TX-DS787 Receiver and an Onkyo DV-S555 DVD player.
For speakers, Klipsch makes some great stuff for the money and it was easy for me to get locally so that's what I went with. I have the KG3.5 tower speakers, with a KSW-12 subwoofer. For surrounds I just use some Cambridge Model Seventeen speakers that I'm not wild about, but they get the job done for surround. I have some Infinity Reference IV tower speakers that I was using as surrounds but they weren't that much better for surrounds (since its not very demanding) so I just gave these to my dad to compliment his new 51" Sony HDTV

.
There are some other great brands out there, but for receivers you really should make sure that you get a nice one in this department. If you are running tower speakers I would say to get at least 100W if you want to play it loud, (that's what I have and it goes way louder than I would ever want it, but then again my dad's only puts out like 75W and his goes higher than I would ever want to turn it up as well).
Good luck, home theater/audio can be really fun and amazing, but watch how much you spend cause you can go broke before you know it so stay within your budget

.