Here's a good starter 5.1 speaker set from a reputable company, Tannoy:
Tannoy 5.1 Channel Home Theatre Speaker System - Black - TFX 5.1 - London Drugs
They will struggle with music, but for movies and games, they should be pretty good considering their size.
As for a receiver, go with this Marantz:
http://www.amazon.ca/Marantz-NR1403-...s=marantz+1403
I have an older slimline Marantz and it's pretty damn good for small to medium size rooms. Marantz doesn't cheap out on the components on these receivers, despite the form factor.
A home theatre system for $500 and change with money left to spare for an HTPC.