Help in setting up my first sound system

Start with your room size and dimensions and how you plan to use your stereo.

How much room do you have to play with in the listening room? Some speakers sound fine at about 18 inches from the wall behind them. Some need 3 feet or more. Some need 5 feet to the sides. Some don't.

What kinds of music do you favor? How loud? The solution that favors small group jazz and acoustic folk would be different than the one for heavy metal or the one for bombastic orchestral music. If you want one system that handles all equally well, be prepared to spend more money.

How do you plan to use the system? Will you primarily sit and listen in a sweet spot? Will others be listening with you? Will you have the stereo on while you wash dishes and kids and dogs run in and out of the listening room?

Do you want speakers with a wide, space-filling dispersion, or something that presents a tightly focused image if you sit *right there*?

What's most important in music reproduction--speed and clarity, frequency extension, warmth and an organic sensation, transparency, evenness of tone?

Will you be using the system with TV or home theater? Surround sound? Audio only/stereo only?

Answers to these will help narrow down your search.

02-03-09: Mags5000
The answers given above are good advice indeed. But, be honest with the type of listening you will be doing. I spent a huge amount of money on a dedicated room, high dollar system, room treatments, and was rewarded with a great listening experience. I now listen to that system about 10% of the time. In my pool (table) room I have a less expensive system that is in use the vast majority of the time. I have friends over, we eat, drink and party rather than sit in the sweet spot.

That's why you need to honestly examine how you *will* use the system, rather than how you might use it under ideal conditions. In my case, with an open architecture living area and various kids and dogs moving throughout the area, I chose Mirage omnidirectional speakers. They're compact, sensitive, and turn your entire living space into a general sweet spot. They exhibit very even timbre, tonality, and stable stereo image whether you're sitting, standing, walking about, or off to one side. Yet if you sit in the sweet spot, you do get more detail and soundstage.

Many speakers only sound right if your ears are at the tweeters' height and you're no more than 15 deg. off axis. That type of speaker is fine for nearfield monitoring, but for a more sociable setup, omnidirectional--or at least very wide dispersion--speakers rule.