Wow this is a really nice thread. Lots of great suggestions and not much flaming nice. the one bit of advice that many have said here that will benefit you is do your research. I have a very nice system right now that I am content with but I had to learn many hard lessons along the way. Lessons that dealt with buy a lot of junk electronics, speakers, and accessories without doing my homework. Along the way though I educated myself and am now happy. With 2K now here is what I would suggest to you.

Pretty much all HTIB are junk but not this higher end Onkyo set up. I have a couple of friends that have this system and it sounds very nice. It offers a better set up than most any people you will meet will have...
http://www.amazon.com/Onkyo-HT-S9100THX-Channel-Receiver-Speaker/dp/B001AMUFSE/ref=sr_1_1?ie=UTF8&s=electronics&qid=1255144014&sr=1-1

There are a few projectors now that are 1080p for under 1K. Might as well go 1080p to slightly future proof your setup. Here is one that looks nice. I heard there is an Optima one too for 1K.
http://www.amazon.com/Vivitek-Lumen-1080p-Theater-Projector/dp/B002I6319Q/ref=sr_1_1?ie=UTF8&s=electronics&qid=1255144248&sr=1-1

Now for Movies and gaming get a PS3. I have the both the 360 and Ps3 but Ps3 you get the bluray too. Better for your needs. The Slim can be had for 300.

Any cables go to monoprice. You will thank me later.

In the end you will only go a couple hundred over budget. Not bad considering you will be making few compromises. If you are wondering what to use for your projector screen. Improvise at first. Go the poor mans route. Go to Home Depot and get a 100 diagonal piece of particle board cut for you. Then go to Wal Mart or Michaels and buy some white fabric to cover the board. Use staple gun to secure fabric on board. Hang your poor mans screen wherever you want. Then shop around and save you money. Buy a nicer screen later. Hope this helps man...

Boy oh boy yamaha. Can we make some gear that looks a tad fresher than 1995. I know it what's on the inside that counts, but damn!

Blehhh...sorry double post

What's the deal with these remotes? Who makes them? they look extremely similar to the AR Excite remotes that are already out. Lots of owners already have a few good gripes about them too. Hmmmm?

http://www.araccessories.com/araccessories/ARAccessoriesInfo.do?ACTION_TYPE_ID=ACTION_REMOTES

What's the deal? Who is making these remotes? Because they look very similar to the AR Excite remotes that are already out. Lots of owners in the AVS forums have had some gripes about them too. Hmmmm?

http://www.araccessories.com/araccessories/ARAccessoriesInfo.do?ACTION_TYPE_ID=ACTION_REMOTES

That is just beautiful. Now make a 65incher at an affordable price and you got my business JVC. First by the way!

A fancy pretty GUI in a receiver as a top selling point is majorly overrated. As long as it is simple, intuitive, and user friendly, who really cares about colors and fancy graphics and text? And once your settings are done you never really use the GUI anyways. Another thing. Does anybody who has a serious HT set up want their wife tweaking around with the receiver settings on the receiver GUI?....Not me! lol...The first poster was right on the money. Sony used to make some decent AV gear. But now anything below the ES line is subpar. And if you buy ES it is simply overpriced compared to features and build quality of other brands in it's class. And that is the reality...

LOL...I meant a PS3 slim

Knowing SONY, they should introduce this at 199$. Buuuuuut they won't because they are idiots in the marketing sense. Grab a PS2 slim for 300$ and call it a day.

"care to elaborate?"

Sure...overpriced junk!

Hope that clarifies things for you.