$3000 Speaker/electronics budget

I recommend spending about $2500 on speakers and $500 on electronics.

$1000 on each.

I disagree pretty strongly with some of the posts above.

First of all, a quality DVD source SHOULD be part of your friend's budget, whether it is now or not.. He really needs to go see the difference a good DVD player makes by auditioning at least one and comparing it to whatever he is using now (presuming a standard mass market player). It will make far more difference than your friend can begin to suspect.

As for fund allocation, I would do it as follows:

Arcam DVD 78 - around $600 used when you can find them (1 k new). Absolutely nothing comes close for video and audio quality anywhere near this price range.

Arcam AVR 250 receiver - $800 used.

Then spend the rest of the money on speakers - either Paradigm monitor series or Rega's new R series. With these speaker lines, $1600 goes a long way, even buying new (which I think I would do for simplicity’s sake).

At this price point I would avoid getting a separate amp and processor. I think separates make sense only if he were to go up substantially in his price range.