Totem Speakers and Home Theater

Get a good used AVR (Denon, Sony, Marantz, Onkyo etc). I like and use the Onkyo AVR TX-NR 905. Easy set up,great remote, great sound, plenty of power, runs quiet, decodes all the new codecs.

All things equal, you can expect modest results from sub $1k receivers (new), better results from more expensive flagship receivers, and the most powerful ,dynamic, and refined sound from a separates based system. That's not really changed through the evolution of the hobby.
My experience suggests that you can easily assume you're going to have twice the sound quality out of a separates based system, over similarly price flagship elite receivers. Power delivery is much better on the separates dedicated amp, issolation of electrical polution is reduced for lower noise floor, pre/pro's usually offer better dynamics and refinement over receiver's electronics, and the amplifiers aren't usually up to snuff in a receiver, which also has to drive the rest of the electronics in the piece -further diluting power distribution.
I would say it's easy for you to try some highly rated receiver, then try the same receiver using it's amp-out's to drive an outboard amp. This will better get you an approximation of what's happening between options .If you're impressed with separates approach at that point, then you can look into separate pre later if you like. Remember, Emotiva UMC-1 is only $699, and used 5 channel amps can be had for a few hundred bucks. A rather attractive proposition to those looking at $1200 receivers. The comparative sound could theoretically yeild you 200% better sound quality with the separates in this case - me thinks.

I have a setup using Mite T and TC upfront and mites for the surrounds. Powered with a Rotel RMB 1075 and Denon AVR 3600. Sound improved quite a bit when I added the Rotel amp. Very happy with the setup but will so dump the Denon and go to a Onkyo/Integra preamp.

Just a follow up. The RMB was 600 and in perfect shape and I recently pickeup a Denon AVR 4800 for around 300. While the Denon does not have HDMI switching you are able to use 8 RCAs and let the Blu ray decode. Within you budget and a nice setup.

When you get more funds just upgrade with a preamp.

The Denon AVR 4800 is a great piece. Just know it only powers 5 channels, even though it is a 7.1 AVR, the first ever 7.1 AVR at that.