Where do I start with a home theater system?

Finsup, I have had very satisfying results setting up 7.1 in small rooms. In small rooms were the listening position is backed up to the rear wall I installing non dipole speakers behind and above the listening position. Pointed them directly at the ceiling and letting the room correction function works very good for the rear effect.

The side surrounds can also be mounted near the ceiling aimed at the listening position.

If you can keep the HT separate from the two channel system all the better for your two channel. Then start from the beginning and go cheap. You don't need to spend a lot of money to enjoy home theater.

I suggest a new receiver with the most up to date codecs and room correction. 7.1 is better. You rarely, if at all, hear of anybody going back to 5.1. The receiver doesn't have to be top of the line. The 7.1 matrixing of 5.1 media works very well and creates a much bigger surround field even in a small room.

Its best to use seven matched speakers but using the matched center is fine. Stay small and thrifty with the speakers and hopefully used.

A good sub is what makes HT fun so budget more here. Again used, you'll have room correction in your receiver so you don't need a sub with correction software.

Unless your already a big movie renter I'd forgo the disc player until later.