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Do you absolutely need surround? I'm not a snob when it comes to sound gear but cheap surround is always inferior to quality stereo. I gave away/sold all my home theatre stuff ages ago and have used stereo setups since. So much better. And you get a capable music system as well.
My current set-up is very budget, yet totally acceptable in a small living room environment.
I use a small Phillips micro system stereo as the sound for my TV - I think it was £90 from argos. It has a sound quality that beats many package cinema systems.
TRA
Fair enough, that £200 setup seems more than enough for my needs. I better put some money together.