You said you were setting up a home theatre system. Home theatre is essentially about setting up a 5.1 system (most DVD's and Freeview on TV3 is 5.1) or a 7.1 system. Since you have a limited budget let’s put the 7.1 aside to save you the cost of 2 extra speakers.
5.1 means that on, say a 5.1 DVD, sound is mixed so that unique information is sent to each of the five speakers individually. By hearing all 5 at once you get a more engaged sense of the movie. (Oh - and I was with you with listening to music with my eyes closed - but last night for example I was listening and watching on wide screen David Gilmour Live at the Albert on a 5.1 DVD - wonderful!)
So imagine a music scene in a DVD with a drum kit to the left of stage, lead singer and guitar at centre stage and backup vocals on the right. With a 5.1 home theatre you will see and hear the drums and associated percussion coming mainly from your left speaker and a little in your centre speaker. Your lead vocals and guitar will come mainly from your centre speaker (and a little in your left and rights) and your backup vocal will come mainly from your right speaker and a little from your centre.
If you are at a real live music concert not all your sound comes off the front stage as you get reflections around the concert hall - in a 5.1 Home theatre these will be what comes through in your rear speakers. When an audience claps you will get this through all speakers as a person in an audience is usually surrounded by the rest of the audience.
So that your speakers don't get over loaded with information the low bass sound (the LFE track) gets diverted to the subwoofer. So, for example when the Bass drum is hit this sound will mostly go, not to your left speaker, but to your subwoofer - leaving your left speaker to better handle the Snare Drum and Crash Cymbal.
So where I am I leading to - essentially if you want home theatre you need five + 1 speakers.
Some Home theatre is set up using the "Phantom Centre" method but in my view this doesn't work as optimally as a true centre. A Phantom is where you only have a left and right speaker and you tell your AV receiver to route the Centre speaker information to the left and right speakers in such a way as it "seems" that you actually have a centre. In reality all you are doing is fiddling with the sound which ultimately results in something the Producers didn't intend. You also tend to loose the effect if you aren't sitting dead centre between your speakers and if several people are watching the movie those to the left and right will have a different experience as they will be closer to either the left or right speaker - destroying the "Phantom"
You could of course just get your 2 speakers and amp and set your DVD's to play in 2 channel mode - but if you are doing this you are, IMO opinion setting up a stereo and not Home Theatre.
So how do we spend your money?
How about $900 on this Marantz http://www.trademe.co.nz/Electronics-photography/Home-audio/Amplifiers-tuners/auction-263401633.htm
or this onkyo http://www.trademe.co.nz/Electronics-photography/Home-audio/Amplifiers-tuners/auction-264108849.htm
What about $1000 for these KEFS (not a fan myself but you'll get the idea) http://www.trademe.co.nz/Electronics-photography/Home-audio/Speakers-and-stands/Home-theatre-sets/auction-264141638.htm
Or for $1000 get this pair of floor standees http://www.paulmoney.co.nz/shop/speakers/floorstanding/mission-m64i-floorstanding-spe
plus $500 for this centre: http://www.paulmoney.co.nz/shop/speakers/centre/mission-m6ci-centre-speaker
Plus $450 for these as rears http://www.paulmoney.co.nz/shop/speakers/bookshelf/mission-m30i-bookshelf-speaker.
and $900 for a sub http://www.paulmoney.co.nz/shop/subwoofers/velodyne-cht10r-subwoofer
That leaves you around $1,200.
So $400 for this personal favourite for great DVD over HDMI, CD and SACD: http://www.rapalloav.co.nz/product/244/Oppo-Blu-ray-Players/
and $229 for a Feeview box: http://www.dse.co.nz/dse.shop/4b4cdce803246a84273fc0a87f3b06e5/Product/View/G7503
and you still have change!