Starting From Scratch for Under $1000
Home-theater equipment is big and bulky, and if you've just moved to a new city you probably didn't bring your TV with you. With the right parts, you can put together an awesome home theater setup for fairly cheap.
You can cut costs with a solid TV from last year's collection of models -- the Vizio VT420M, for instance, now costs about US$650 (down from $1000 last December). Since the VT420M has excellent built-in speakers and a headphone jack, you can save a few bucks on your audio setup by hooking up a pair of cheap PC speakers or sticking with the built-in ones.
If your budget is extremely tight, visit deals sites like Dealnews and watch for older brand-name 720p models; the difference between 720p video and 1080p video generally isn't as noticeable for HDTVs with screen sizes between 37 and 42 inches. Before committing to a purchase, though, be sure to read "10 Things You Need to Know Before Buying an HDTV."
Kogan HD TV
If you live in Australia, you might also want to give Kogan Technology a try. Kogan produces good-quality HD TVs and home entertainment products that cost a lot less than competing products from Sony, Panasonic, et al. We especially like the Kogan ELITE LED32 LED TV; a 32-inch LED television that retails for just $749.
Since nothing says "nerd" like a bulky desktop PC parked in the middle of your living room, consider streamlining your décor by picking up the Panasonic DMP-BD60K Blu-ray Player and a set-top box like the Western Digital WD-TV Live Plus.
Between the Blu-ray player and the set-top box, you'll have ready access to so much high-def content from the Internet, your PC's media library, and new Blu-ray releases that you can painlessly forgo cable TV.
All Work and No Play? Make a Home-Office Theater
Maybe you're a broke college kid looking to repurpose your work tech for fun. That doesn't mean you have to go without a decent TV -- it just means you need to do some strategic planning. With a few key purchases and the right know-how you can bend your ultimate workstation into a dorm-friendly den for under a grand.
The plan here is to build your setup around your laptop; if it's capable of playing full-screen HD video, it'll work fine. Even a humble netbook will suffice, if it carries an nVidia Ion chip (such as the HP Mini 311 and the Asus 1201N). Bonus points for having an HDMI port, though VGA or DVI will work, too.
Your laptop's built-in display is fine for taking notes in class or during a meeting, but realistically you can't be expected to put together a presentation or do class readings from such a tiny screen, right?
Turning your laptop into a media centre can save $$
So spring for an external monitor -- you can find a name-brand 22-inch display for about US$160, or a 24-incher for $200 or so. Considering that you'll be using it for work and play, you'll probably want a widescreen monitor (one with a 16:9 aspect ratio if possible, though 16:10 will work) so your movies and games don't get stretched or letterboxed.
Since you'll sit closer to your display at your desk than you normally would in your living room, a TV with a diagonal screen size of greater than 32 inches would actually be harder to use as a regular PC display.
As for audio, feel free to skimp on the speakers; a pair of $20 no-name speakers outperform your laptop or display's built-in speakers. Be patient and you might be able to scrounge some used speakers from your school or office for free.
Finally, throw a game console on top. Whether you opt for an Xbox 360 or a PlayStation 3; it's a cheaper way to get your gaming fix, and you'll be able to use the console as a DVD player if your PC doesn't have an optical drive (or a Blu-ray player, if you get the PS3).