I have Axiom M22 speakers with an inexpensive Yamaha sub woofer.
My reciever is a Yamaha RX-V461. I play my MP3 files through an iPod using the special Yamaha iPod dock. (very cool, your music is displayed on the TV and you can control from the yamaha remote.) The reciever is set to straight 2 channel stereo. I use Nero v7 to create my mp3s at 320K highest quality dual mono. They sound fantastic.

I do have a bass issue, where the bass is only really deep in some parts of the room, luckily where i sit is just fine.
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Yamaha RX-V2700 / CDC-815 , Oppo DV-980H , Axiom M22s , Paradigm DSP-3100