If the small form factor loudspeakers are important, ignore what I'm about to say ...

Best of the bunch is the Onkyo HT-S790 for the receiver/speakers/sub combo. Installed similar pre-S790 Onkyo system for a friend on low budget but using 12-guage speaker cable bought on 250-ft bulk roll instead of the cheap stuff supplied, couldn't be happier for the bucks. We chose to go with our own choice of DVD/SACD/DVD-A/(and more) universal player instead of buying the more expensive Onkyo bundle that had an Onkyo player included. Also added well-made, mid-grade interconnects and kept the total budget under $1K. The larger drivers in the Onkyo HTIB loudspeakers outdo the smaller speakers of similar and somewhat more expensive systems, IMHO.

If you wish to push the budget to $1.5K, use the Onkyo supplied subwoofer in a bedroom system and buy an Outlaw LFM-1 or LFM-1 Plus to use with the Onkyo 7.1 system for bass 'that won't quit' before the rest of the system reaches its limits. If he ever upgrades to separates and better speakers, the Onkyo sub can rejoin the original set for use elsewhere and the Outlaw LFM goes with the new upgrade separates/speakers as his main system.