I think everyone's setup evolves... it took me years to build mine and it wasn't until I moved into my current house that it was actually complete, and now I'm into the cycle of replacing outdated components and making improvements to the room. Don't go thinking I just snapped my fingers and dropped all that cash over a long weekend
The Summer after my Sophomore year in college I owned nothing but a Dreamcast and 25" CRT. My roommate the previous year had a cheap home theater in a box that we enjoyed using when playing movies on his PS2. I wasn't going to be living with him so I decided to start building a good surround sound system.
I did my research and decided that I'd rather build a no compromise system that would last me at least a decade rather then just some cheap all in one package that would probably sound like crap and break after a few years.
I worked my ass off with 2 jobs that summer to make school spending money and start my home theater. I saved about $1000 and I used half to buy a refurbished Marantz surround Sound Receiver (about $800 new I got it for about $450) and a pair of Refurbished Cambridge Soundworks Towers for about $550 shipped ($1200 new). They each came with 10 year warranties so though they were refurbished I wasn't too worried about them breaking and I felt I was definitely getting my money's worth. I had to sit on them both for a few months before I could set them up pertinently because I didn't have the space at my parent's place.
I enjoyed awesome stereo sound on the Dreamcast for quite a while. I had a friend who was going to throw out some old tower speakers that weren't working right so he gave them to me and for about $20 I managed to build some new crossovers for them and used them for my rear channels. They worked for what I payed and actually matched the tonality of the fronts pretty well. I soon got an Xbox and started using that for DVDs (we used my new roommates laptop for that prior). Soon after that I won a Barco 500 CRT projector in a bet (a long story in and of itself). I hadn't planned on getting a projector but it was a cool thing to have, I didn't have any good wall space so I made a screen out of a bed sheet and some PVC pipe. Before the end of the year I bought a good center channel for about $100 and the following summer I bought a real screen on eBay for about $250 (it was a $500 screen that was discounted because it had a dent in the recoil housing).
When I graduated college I bought myself a DLP projector for about $1000, I was living with my parents again so I had to put the surround sound in storage but the projector was small enough that I could use it. Almost a year later when I bought my house I ditched the crappy towers I was using for the rears for some real satellites, my GF also bought me 15" self power sub-woofer as a birthday gift which finished the sound system after many years. it took a good two months before we remodeled the basement to be acceptable for use as a home theater. The couch was financed when we bought the house, the bar came with the house and the pub table was a house warming gift.
After a while of manually switching inputs on a really crappy pelican switcher I bought a nice remote controlled Psyclone. I haven't done anything in nearly 2 years, saving for the next big purchase but just last week I bought a Harmony remote which I'm loving and I'm planning on upgrading my projector in the next couple of months with a $2000 ish DarkChip3 based system.
Beyond the projector the next step might be some new lighting in the room, and perhaps some new wall treatments or a new or fixed up ceiling. The next piece of equipment I replace will probably be either the screen or the receiver.
It's an evolving process and it's taken me many years to build it up to where it is today
