NEED ADVICE: Want 42" LCD TV for use with given system specs

That sounds like a good idea.

But, if I don't have $1.5k to spend on audio, and since I have a pretty small room, what product do you recommend that I can use that would have only a couple speakers and a receiver? Or do I *have* to go with the whole 'shabang'?

you can do 2 front speakers, a sub & use the tv speakers as a center speaker. Then in a year or whenever get a center speaker & then in the future if you move the system to a larger room add some back speakers.

Just get a reciever that has HDMI 1.3 & can decodes the HD audios. You don't not have to get everything all at one time.
It took me 2 or 3 years to get to my final 5.1 system, I started with a reciever (Yamaha rx-v520 ) & a center (JBL), then a few months later got some small fronts (JBL) & then a sub (JBL). I moved & had more room to expand, upgrade the fronts (JBL), upgraded the sub (12" 300wt to 12" 500wt JBL) & added back speakers (JBL), I still have the same center speaker 7 years later. The reciever is used in a diffrent room, I upgraded that too over the years (Yamaha rx-v1500).

Just keep to the same brand speakers, subs it does not matter, as long as the crossover can match the other speakers.

piece. It does require discipline which is hard to come by. Yes, all speakers but sub woofer are usually best by staying with the same brand.

I am not a fan of sound bars, however. Common audio needs are not particularly difficult. Folks can get interested in highly advertised receivers & can overbuy. A rather basic Onkyo is commonly recommended because that company is making receivers with up to date connectivity (HDMI 1.3a) & nice features in a high value package price.

You can build a set of speakers over time if you have the discipline (hard to come by) to do it. It can be very much worth it. You can start with just two quality speakers, the front L&R. When you add a center channel, do not skimp - & stick with same brand. Surrounds can add on later. When adding a sub woofer, it is a big deal. Another major speaker consideration to not skimp on. A good idea of money for a sub is about as much as you spent on the front three. Sub woofers are best made by makers that specialize in them, such as Hsu. Use the search feature to find much discussion of specific sub woofers.

The surrounds & rears are not as individually important as others, so they may be a bit lesser cost. The final result will make you confident you have selected speaker sound to enjoy with pleasure for many years.

Thanks for all the good advice! I believe I have quite enough to go on, now.

Thanks again!
-JW