was thinking of ONKYO 770 coupled with Pioneer SACD/DVDA/DVD player (DV-578A)?

With this you will have great sound. Then you can add the center, surrounds and sub later. By this point you will have a system which will far, far exceed anything $500 gets you for an all-in-one.
HTIB is to the movie experience what McDonald's is to the eating experience.
$500 worth of good quality stereo is a lot better than $500 worth of plastic speakered, horrible-sounding surround sound.

...assuming you care about sound quality.