For entry level equipment, IMO they provide excellent bang for the buck. There's even an outlet center online that would give you access to deals from time to time. As long as your budget isn't terribly limited it would also provide room for future growth of your HT system and provide the correct inputs/outputs/audio decoding/etc.
To be perfectly honest, I'm not a Sony fan at the same price point- spending a bit more than the product you've cited would certainly help you in the long run. Many of the Onkyo receivers provide support for iPod/docks, etc. that would compliment your current equipment. You will really enjoy the surround sound upgrade by itself- for movies it can mean the difference between feeling you're a spectator or actually part of the action(!) I remember when we added a Onkyo 5.1 receiver to our 'stock' Trinitron/carousel DVD player system right after my daughter was born. It eventually became difficult to watch movies w/o DTS or DD surround sound. Even w/ a CRT you will hear/notice things in many of your favorite movies that were invisible to you previously w/ only stereo sound via the boob tube speakers 
.
Regarding iPod content, a great deal of the downloaded video content looks less than ideal when you enlarge beyond the small iPod screen. SD content (such as a sitcom) you downloaded from iTunes, etc.) would probably get a passing grade on a CRT display. At least as good as VHS anyway. OTOH, piping in your playlists via a surround sound receiver is a great way to re-discover music that sounds a lot worse IMO via the stock earbuds. I had to add an iPod dock separately for about $59 four years ago, but Onkyo may even sell a HTIB now which includes it.
Have fun,
Pedro
I want to get a new Home Theater (HT) that can do double duty by replacing my old 1980's stereo with HUGE speakers, freeing up some family room real estate, and giving me the HT experience i've never enjoyed. I would love to have the 5.1 option but I don't know if it would work on my TV or if it will be passable until i get a new one (year or more away) but the home audio and DVD would still benefit from it.
I was looking at the SONY:
http://reviews.cnet.com/home-theater-systems/sony-ht-ddwg700-home/4505-6740_7-32909100.html?tag=mncol;lst
It answers most of my concerns but I'm wondering if there is an option available to play the videos I have on my ipod and not just the audio. Plus the receiver looks to big for the TV cabinet shelf it needs to fit in (over/under the DVD player) 
I currently have:
-TV = SHARP with VCR integrated has coax in the back and ONLY 1 video out on the front and 1 audio out on the front. lol I know its old but an HDTV will be my next upgrade. Not a priority with my wife. I'll be lucky to get the HT! - 8 years old
-DVD = SONY progressive scan - 1 month old
-ipod 160GB with music, videos, TV shows - 9 months old
An sensible ideas from the people who know these things?
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