$4-500 total? For all speakers and receiver?
That's a toughie...even with 2.1.
How about 2.0 for now? The sub is one of the most important speakers in your setup - don't get a cheapie.
Monoprice makes a great sub for the money, BUT, you're also talking about a large room - the larger the room requires a more powerful subwoofer.
What I'd do is this:
1. Buy your AVR either refurb or lightly used. As someone else mentioned, accessories4less is a great site for refurbs. Spend no more than $200 - you should be able to find one that fits your current needs at that price. Don't worry about brand - anything from Denon/Marantz, Yamaha, or Pioneer will work great.
2. Spend the remaining $300 on a pair of decent bookshelf speakers. A pair of Elac B6s, or better yet - the Ascend Acoustics mentioned above, or a pair of SuperZeros from NHT will all sound great. On the NHTs (which I have) - just email them asking what the best price they can do, you'd be surprised (or buy them off Amazon). The Ascend's are $350 FWIW.
The great thing about the Ascend's and the NHTs is once you finally go surround sound, you can upgrade to the NHT SuperOnes or the Ascend Acoustic 340s and move the previously purchased ones to surround duty.
Good luck