2007.03.17: The home theater market is changing faster at this time than I can ever remember in the past. The technology to watch of course is the LCD screens which are getting bigger by leaps and bounds. Currently the most cost effective large screen solution remains the Digital Light Processor projection screen. We've enjoyed ours for the past 2 years. I was worried about the life of the bulb but so far it hasn't been a problem. Living in a very brightly lit environment, the greatest problem is wash out during the day. The viewing angle is also somewhat critical but all in all, it's an elegant solution to High Definition and a large screen. Plasma remains the brightest picture but LCD is right at its heels. The next couple of years are going to remain very interesting as the market shakes out. At the moment, if you are looking for an HD solution of 42" or greater, then I'd stick with a DLP.
Surround sound is a great adjunct to HD. Having a large HD screen set without it is a bit of a contradiction. Fortunately there are lots of low cost choices under $300, some even under $100. I'd probably stick with one of the sets that are between $200 and $300 with a built in DVD player. You'll find lots of brands that you haven't heard of before. They can be a little quirky but still manage to do the basic job and deliver reasonable sound.