You should probably set the crossover on the sub at its maximum. The receiver's internal crossover will decide what signal to send to the sub. If this results in excessive bass, then you can turn the crossover down to the point at which your system sounds best.
M22s should be set as small for HT purposes. If you use the sub for music as well, they should probably still be set as small. If you listen to 2-channel music without the sub, the reciever should give you the option to use the M22s as full-range without having to reset speaker size.
DVD players are pretty much commodity items, so a good one under $500 should be REALLY easy to find. You should consider features as the best way to narrow down your search. Do you download a lot of music? Get a player that does MP3 decoding. TV accepts progressive inputs but has no line doubler? Progressive scan is a good buy. Have a collection of hybrid CD/SACDs? Look at Sony's SACD/DVD players. Many players at a typical "big box" store should fit your bill. You should also check www.audioreview.com with models you've narrowed down to...many people on that site describe positive and negative experiences with certain models or companies. This can really help you avoid buying a lemon. Then audition, audition, audition.
