I have a 2 channel set up. What is the best way

The approach you are considering will work, but the hook-up process may be a little complex. Another approach, which many people with 2-channel systems have used to get into HT, is to buy an outboard surround processor and a 3-channel power amp (for the center and surround speakers).

I have helped several people install the Technics SH-AC500D Surround Processor, which provides Dolby Digital 5.1, DTS, and ProLogic decoding. The unit also provides a pass-through circuit that lets you operate your 2-channel system without running the signal through the digital circuits. This model can be purchased discounted for under $300. My son has one of these units in his HT setup, and I've been impressed with its performance for such a low price.

If you decide to get an outboard processor, you will need an external 3-channel power amp. There are a number of moderately priced amps, such as the ones made by Adcom (used 5503's sell on A-gon for around $600-650) and Rotel, and if you really need to save some money, the amps made by AudioSource have gotten pretty good writeups by non-highend audio mags.

How would the 3 channel amp connect to my integrated amp?

To work as I've suggested, your integrated amp would need both "pre-amp out" and "pre-amp in" jacks on the back panel. The signal from the "pre-amp out" on your integrated amp would have to be routed through the Technics surround processor, and then back from the processor to the "pre-amp in" jack on the integrated amp. Then, the integrated amp would be used to drive your front speakers. The surround processor has additional outputs on the back that go to the 3-channel amp that will drive the center and surround speakers.

While the surround processor is engaged in the circuit, it will decode the 5.1 signal, feeding the decoded signal to all 5 speakers, plus a subwoofer (if you have one). The surround processor also has an output on the back panel to drive a subwoofer, but if you have no subwoofer, you simply program the processor for "no sub", and it will feed the full-range signal to the main front speakers.

Thanks for the tips. How do you feel about doing this with a A/V receiver. My brother has a A/V NAD receiverto sell to me for cheap. My integrated amp has the in/outs that you said I need to have.

An HT receiver is a good way to do this. You don't need a three chanel amp this way. Make sure the receiver also has inputs and outputs for the main channels.