I spent $200 bucks on a 6 piece (JBL) speaker set at ubid. Not a great deal, but they are decently powered and great for the price. Got a good deal on a JVC receiver as well (dd, dts, dpl, many, many a/v switches, only lacking component or an internal composite->s-video converter). Though I hardly spent 2800+ on my setup, it still sounds great (yeah, not nearly as great as some, but I go to the theater for that sound) and I can always switch over to my two big 'ol stereo speakers for music and the like.
To answer your question, that is a pretty horrid deal (I think this has pretty much been covered). In the Sunday circulars you can usually find a Dolby Digital/DTS/Dolby Pro Logic decoder and 6 speaker package for like 400 bucks (Ok, maybe not DTS all the time). I suppose if you just want it for a receiver, and are powering a 5x5 room, it's OK. Otherwise, look for a better receiver elsewhere. You will absolutely not get "surround" sound in the sense most are accustomed to with this receiver. Only a 3 channel mix. If you are looking for a DVD sound system, you want at least a Dolby Digital capable receiver/decoder. Note that, if this receiver has an analog 5.1 input, you could buy a DD/DTS decoder seperately, but really you may as well get the whole shabang at once eh?