I wouldn't look for a single unit that does everything as these tend to end up doing nothing as well as standalone units.
VCRs are dirt cheap these days so you shouldn't have much trouble finding a decent Hi-Fi Stereo model at a decent price. Connected to an AV receiver capable of decoding Dolby Pro-Logic, they're still able to provide a reasonable surround sound experience.
As for a DVD player, you'll probably want one capable of decoding DivX/XviD files. I myself have one of
these which has served me well for the past year or so. I've had a few hiccups with certain encoding methods (>1 warp-point GMC and XviD packed bitstreams mainly, though the latter was fixed in a recent firmware update) but otherwise it's played just about everything I've thrown at it. Not sure about availablity outside Oz but there are a gazillion players based on the same chipset (Mediatek 1389) so it shouldn't be hard to find something where you are. If you want the ultimate in PC format compatibility though, look into something like a Media Centre PC or modified Xbox running the Xbox Media Centre software (I'm not sure how basic DVD players fare on these, you may have to buy a standalone DVD player as well but they're fairly cheap these days and even entry level models over such niceties as progressive scan component output and optical/coaxial digital audio output).
As for a surround setup, you'll want something that's capable of decoding at least Dolby Pro-Logic, Dolby Digital and DTS. The first two is pretty much a given among A/V receivers but the latter isn't typically found on cheaper ones.
Speakers are also fairly important. I was once told that whatever your budget is, half of it should go toward speakers. I'm no audiophile though so the reasonably cheap speakers in my surround capable Panasonic Hi-Fi system (which does Dolby Digital and Pro-Logic, but not DTS unfortunately) do the job well enough for me.
hth
