I'd appreciate comments / suggestions on this potential setup. Our priorities

1. We want the best video and sound for HD TV and DVD's
2. Would like to control everything with one remote
3. We listen to a lot of CD's but are would not consider ourselves audiophiles
4. We will be going with HD-TIVO eventually.

TV: Sony KDF 50E3000
Receiver: Onkyo 674
DVD Toshiba A2 (this only goes to 1080i. Does anyone anticipate a firmware upgrade to 1080p, does it matter? or am I wasting money buying a 1080p TV unless I upgrade to the XA-2?
CD's through the DVD
Speakers: No idea

everything looks acceptable here. I doubt there will be a firmware upgrade to 1080p for the A1, A2, or A3. These were sold at bottom dollar so they are gonna stay 1080i. Not to say you are gonna notice a difference. Im gonna be buying a speaker setup soon and I've been looking at Aperion. They look great and affordable. The Onkyo 605 is newer and only going for about $400. Unless you are getting a great deal for the 674.

Thanks. Cnet knocks the 605 a bit:

"Downconverts 1080i component video signals to 720p when outputting over HDMI; HDMI video quality converted from analog sources may not satisfy videophiles;"

Is this a big issue?

Yeah, I'd say you may want to go with a 1080p HD player for a 1080p TV. On the other hand depending on your seating distance you may not see much difference, or at least not a couple hundred dollars worth. You may be able to pick up a Toshiba A3 for under $200 on black friday though.

I love Onkyo, I've got 2 Onkyo receivers. One is 14 years old and I use it every day. Solid as a rock. As mentioned above the 605 is decent, aside from the 1080i down conversion issue. If you have a 1080p player, or 720p TV it's not an issue at all.

The only advice I have for speakers is this: Ignore most of what you read, don't pre-judge brands. Go out and listen. Take music you are very familiar with, and visit some nice audio shops. Listen to as many different brands as you can. Nearly 1/4 of my home theater cost was the speakers and I am very happy with them. You said you don't consider yourself audiophiles that's fine, I'm not either. Just take your time and listen. Let your ears make the decision.

Looks like you have your priorities, now set a budget. Picking the parts is always the most fun/grueling step.

Regarding the 1080i DVD players, Below is Evan Powell's (Projector Central) appraisal of the 1080i vs 1080p controversy.

"The truth is this: The Toshiba HD-DVD player outputs 1080i, and the Samsung Blu-ray player outputs both 1080i and 1080p. What they fail to mention is that it makes absolutely no difference which transmission format you use—feeding 1080i or 1080p into your projector or HDTV will give you the exact same picture. Why? Both disc formats encode film material in progressive scan 1080p at 24 frames per second. It does not matter whether you output this data in 1080i or 1080p since all 1080 lines of information on the disc are fed into your video display either way. The only difference is the order in which they are transmitted. If they are fed in progressive order (1080p), the video display will process them in that order. If they are fed in interlaced format (1080i), the video display simply reassembles them into their original progressive scan order. Either way all 1080 lines per frame that are on the disc make it into the projector or TV. The fact is, if you happen to have the Samsung Blu-ray player and a video display that takes both 1080i and 1080p, you can switch the player back and forth between 1080i and 1080p output and see absolutely no difference in the picture. So this notion that the Blu-ray player is worth more money due to 1080p output is nonsense."

I had found Evan Powell's (Projector Central) comments on the 1080i / 1080p issue, but, being a non-technical type, they confused me a bit. If I understand the comments, a 1080p HDTV will reprocess a 1080i DVD signal to be equivalent to the non-interlaced image? I believed (perhaps mistakenly) that the issue with 1080i was that it sent every other line of image. If that is the case, dose the HDTV essentially have a buffer that seams them back together before displaying?

1080i sends ALL the lines (not every other), but it does it alternately. Yes, a 1080p HDTV will "seam" them back together. It has to. Since it's a 1080p display, it has to project a 1080p image.