I'd just start with a receiver and two front speakers. $700-$1000 spent on this system will get you a lot better sound quality than a surround system for the same money. You won't get the sound coming from behind you initially, but everything coming from the front (which is where most of the sound comes from anyway) will sound far better than a HTiaB (or any other type of $1k surround system) set-up will get you.

The nice thing about the #2 option is, not only do you get great sound to begin with, but you can build on it later when funds permit.

If you watch a lot of action movies (they have lots of rear speaker effects, most other movies types tend not to), your next wad of cash can be spent on a center channel and rears (buy them together as they are useless when bought at different stages).
If you watch all kinds of movies, maybe you'll be better off getting the subwoofer next. Spending less than $500 (retail) on a subwoofer is something I would suggest avoiding. Subs need a good driver and a high quality amplifier and cabinet to properly deliver the information fed to them. Hard to find under $500 unless you like distortion and lots of midrange-canceling boomy sound.

If you are going to get a subwoofer you don't have to buy tower speakers to begin with. In your position, I'd buy a pair of Usher S520 or PSB B25 bookshelf speakers. Both priced around $400-$500 and are pretty much without sonic peer at the price. Stick them on some nice stands (B&W have some great stands for $100) and you'll be amazed what these speakers can do.

A current Onkyo (for example) receiver with all the features you want at the price that makes most sense to you is probably what I'd aim for. Other folks here will also give you other ideas on suitable receivers in your price range. I'm not in a hurry to suggest Sony or Yamaha receivers if you listen to music which isn't heavily electronic, punk, hip-hop or morbid metal.

There are some good tower speakers in the $500 range of course, but at the price, these bookshelf speakers are a great place to start if you do plan on adding a subwoofer later.

Ditching the HTiaB idea is your best friend. Those things are lousy investments, particularly if you plan on listening to music and having parties. It's the sort of thing I'd imagine you'd quickly dispose of, as adding to them doesn't usually make much sense, only full replacement.

Don't worry about THX symbols and settings. It's there for George Lucas fans only : )

Some of the best surround set-ups I've heard have come from 5.1 systems. It's not about how many speakers you have, it's how good your gear sounds as a whole, how well the speakers are placed and what you want to hear. 7.1 can make sense if your rear speakers are at least several feet behind you (meaning your sofa is floating in the middle of the room somewhere), but otherwise you'll be fine with 5.1 (eventually).

Sig' begineth here: