Where are you located? If you are near a Frys, or don't mind shopping online, they have killer deals on nice components around every holiday. I cobbled together $1K worth of stuff for about $300 by watching their sales and buying when each part was available. You can also check out Best Buy's returns and clearances, which can be another great source. I have a couple of 7.1 Klipsch sets bought at 30% of retail price thanks to Best Buy clearances. Ebay and Craigslist are good sources for used stuff, once you do a bit of research.
Also, you might want to consider that most sources are not made for surround sound. Super CD or whatever it was called never really caught on, so most music is still stereo, meaning the best sound will come from two speakers, plus maybe a sub. Add more than that with music and you are messing with the intended sound.
Same goes with TV, movies, etc. Consider the source of what most of your stuff is, and go from there. If you do watch a lot of DVD/BluRay/premium channels, surround can be pretty awesome, especially if you position and calibrate the speakers properly.
The biggest difference for me is with video games, when enemies coming up from behind make sounds behind you. That's pretty neat and adds a whole new level to the experience.
For specific recommendations, I personally would get a Klipsch Quintet set plus a sub (or one of their other similar sets) for an apartment. They have a very small footprint and sound phenomenal. For a receiver, Onkyo and Pioneer make some pretty solid low priced units that would go well with the speakers.