Best system for the budding audiophile?

Here are some questions you need to answer for yourself (my choices in parentheses):
Tube or solid State? (tube)
Power? (3.5w~94dB/w spkr sensitivity; 7w~91dB/w; 15w~88dB/w)
Preamp or amp with volume control? (preamp eventually)
Floor standers or Monitors? (floor standers)
Copper, silver/copper, or silver interconnects? (copper)
Copper, silver/copper, or silver speaker cable? (copper)
Good luck and have fun.

There is a pair of Merlin VSM III that just listed for $1800. I don't believe they're upgradeable to the VSM-M, but they're still great speakers for the price. Very detailed, yet musical...large soundstage, excellent highs, etc. They're technically a floorstander, but really a monitor with very heavy stand built in (about 90lbs each). They only take up a small amount of floorspace. Not the most bass-heavy speaker in the world, but good, tight, musical bass for a monitor design. They sound best when placed ideally (using Merlin or Cardas recommended placement), but they still sound good placed closer to a wall...you'll just sacrifice some of the soundstage that they're capable of portraying. I've used mine with a Pass Aleph 3 amp. They're great amps, but I think you should go with tubes with the Merlins (17-18 watts and up). If the speakers sound good to you, try calling Bobby at Merlin. You can ask him any questions about that particular model and recommended amps. He's extrememly helpful and he knows which amps, cable, etc. sound best with his speakers. There are similar, more recent, upgradeable Merlin models, but they'll probably sell for more than $2000-$3000. If you're interested in tubes, you may want to check out Rogue. They make some very nice amps for the money and they work well with Merlins if you go that route. You might want to consider an integrated amp, versus seperates, to save yourself some money. As far as CD goes, there are many many options. The Sony 9000ES CD/SACD/DVD sounds like a pretty good bargain and they're going for $800-$900 these days. There are a million more used options. A lot of people are selling very good CD players cheap...just because they're not 24/96 upsampling models. You can probably pick up a very good player for less than $1000...something that was $2000-$5000 when it was new (depending on the age). Good luck.

1) Find speakers that you like. Recommend PMC, Spendor, Harbeth as examples of well rounded speakers that have excellent build quality and satifying all round sound. PMC has a floorstander with a transmission line bass loading that is excellent in all areas. About $2500. However, these are not commonly carried by a lot of dealers so it may be hard to listen to them first.
2) Get a competent solid state amp like the Bryston (the 60 watt integrated will do, the B-60). about $1500, or less used.
3) Don't skimp on the CD player! I believe the rega Planet 2000 is a pretty good value and offers fine all around sound. $1000.
This system will not play super loud but will generally satisfy.
Another route:
Cabasse Farella 401s around $2500, a Cary integrated tube amp (around $1500) - or see audioelectronicsupply.com; and the same CD player. You could also try the audioelectronicsupply speaker which is a bargain and a good match for their electronics. With the high sensitivity the system will not need much power, and the naturalness of the sound will be addicting. This is sort of the audiophile version of the system.

ORRR:
An all-Rega system from speakers to amp to source, can be had for $5000 and the sound, I've heard from all the hi-fi show reports, is always a standout.

finally: Competent cables, as from DIYcables.com.

To get much better sound than the above setups, you are going to have to spend over 2x as much, if not more, looking for that last 2%...unless (or even if) you're obsessed or have too much money, this will be an exercise in frustration!

Sorry, there are just too many options to list!

The molecular structure of interconnects is NOT what a budding audiophile needs to worry about. Nor is "a dedicated power line". Come on guys. Why impose your neurosis on a well-intentioned newcomer? Tube vs Solid State? Fair enough. Planar vs. conventional speakers? Fine. Integrated vs. separates? These are the kinds of things I wanted to know when I first got into this habit.

i'm in a similar situation... i'm about to move halfway across the country, so i'm selling my entire system. but i plan to rebuild at around the $5k range. here's what i plan on getting:

preamp: rogue audio 66 magnum ($900-$1000 used)
amp: odyssey stratos (~$1000 used with upgrades, tough to find for sale on the used market though)
speakers: meadowlark kestrel or shearwater hot rods (anywhere from $750-1500 used)
source: sony dvp-9000es sacd/cd/dvd player ($600-700 used)
cables: virtual dynamics power cords, interconnects, and speaker cables (run around $750-1000 for everything... they are worth the price!)

i've had great success with the tube pre/solid state amp combination. the meadowlark's are transmission line speakers, and i really like this design... best bass reproduction than any other speaker design i've heard. some may think it strange to spend almost as much on cabling as on other major components, but i've found the virtual dynamics line of cables to be just that--a high quality component. in my experience, the virtual dynamics' cables have made a HUGE improvement on my system.

just my thoughts... have fun with your search! i think experimenting and finding what you like is one of the most enjoyable parts of this hobby (next to the listening, of course). best of luck!