I did find the Audio Technica AP-LP120 w/a SHURE stylus total $300 at Amazon that seems a decent combination.
That's the table I had in mind. It comes with a cartridge already installed, though not a particularly good one. The M97 is highly regarded, though I can't say how it'll match with that table. Also, if you buy a table and cartridge separately, you need to install the cartridge, which is one of the more challenging aspects of set-up.
Good suggestion -- I will look for Onkyo in a store w/listening space.
That's fine, but keep in mind that how it will sound will be entirely determined by the speakers it is playing through. You'll be listening to those speakers (and the room), not the receiver. Modern audio wisdom (as opposed to audiophile mythology) is that most receivers will sound pretty much the same. BTW, if you want a real receiver bargain, consider the Sherwood 4105.
does it make sense to consider a pre-packaged multi-speaker system? ... Or better to go with a pair of tower speakers like the Polk AM series?
Given your budget and your obvious emphasis on music, I would opt for the towers.
Better than the Polks, however, would be the Infinity Primus P363s, which can often be found to $200 apiece.
If I got a Denon AVR 1513, w/5 channels, would three channels go unused with only the two speakers?
Yes, but it will be able to deliver somewhat more power to those two speakers than if it were driving a 5-speaker set. If you want to go with an AVR, however, I would get one with Audyssey or a similar room correction capability, like the Denon 1613.