I agree with some parts of what several people on here are saying. Here are my thoughts. You should spend less on the receiver than on the speakers; however, I would recommend getting some kind of automatic room correction (like Audyssey) especially given your less-than-optimal room. If you had a perfect room for the setup, then automatic room correction would make less of a difference
For the receiver I would recommend looking at the Denon B stock on Dakmart. They are an authorized Denon reseller, and they offer a 1-year warranty just like you'd get with a new receiver. They have several choices under $400 that offer some sort of room correction (590, 689, 789, 790, and 2308), but I think the
2308 at about $350 shipped is the best deal. The only negatives I see are 2 HDMI inputs (easily fixed with a remote-controlled switch like
this $30 one) and no pre-outs (you'd have to spend $500 or more to get those and Audyssey, and you don't need to worry about pre-outs with a $1,000 budget anyways). Here's
Denon's product page for the receiver.
That leaves $650 for a pair of speakers. At this point I would try to determine what your future budget is going to be for this system. If you think that next year you'd have $1500 to drop on a couple more speakers, then the $650 pair should be bookshelves that will some day be surrounds. If you're not going to spend more than $325 on any one speaker in the setup, then you might as well get the speakers that you plan on having as your mains. If that's the case, then you need to also consider what center channel goes with those speakers as you'll want to buy the center speaker from the same brand and product line as your mains in order for them to be timbre-matched. This doesn't matter for your surrounds or your sub. Those can be any brand or product line, and it won't matter.
There's nothing wrong with using bookshelves as mains, but you'll likely get more bass from floorstanders, so I'd recommend going with those unless you plan on moving these speakers to your surrounds someday (or you could just go with bookshelves in order to keep your options open). It seems like I'm rambling at this point, so I'll try to wrap this up
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I checked around for some good deals on speakers in your price range and didn't find any. It would be best if you auditioned some speakers to see what kind of sound you like. Sound preference is very subjective, so one person might love their Energy speakers, and you might dislike them. Some online companies will cover the shipping costs for you to try them out for 30 days, so you might try that route as well. If you do go somewhere to audition speakers, be sure to bring some CDs that you know very well and have listened to on your current setup. That will allow you to see the differences between your setup and another one. You could also have them hook up just two speakers with no sub, so you get an idea of what that will sound like.
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