- TV: Samsung LN46A550
- PS3 (80gb with backwards compatibility)
- Sound: Onkyo HT-SR800
- Remote: Harmony 720
My computer is connected to the TV using HDMI and to the receiver using optical SPDIF. PS3 is connected the same way. Anything 1080p looks gorgeous, and anything with 5.1 sound rocks. The best part is that I got everything on sale! The Onkyo system was refurbished and under $300, the PS3 had walmart's sweet $100 gift card deal, the remote was refurbed and under $40, and the TV was relatively cheap at the time.
The PS3 does a pretty good job upscaling DVDs -- they're not as good as blu-ray, but they're not too bad, especially from a normal viewing distance. I watched Mushi-shi, and it looked great, though the picture was a little soft.
Most HD anime fansubs look good too, though the quality difference amongst different animes are quite apparent. Crunchyroll even looks decent at 720p, but anything lower looks like a poor quality DVD :(.
I'm pretty happy with the system and probably won't be upgrading for the foreseeable future. My next upgrade will probably either be the speakers or the TV, but probably not till I move...