You can buy a lot of sound quality in speakers for very little money these days. You lose the deep base, but the quality of sound that you do get is a lot better than it used to be. The electronics will likely be the weak link in that price range. What were the electronics the store was suggesting?

I believe it's always better to spend decent money on the source component. In my younger days I remember buying my first high quality turntable and cartridge thinking I was just throwing good money out the window, after all, a turntable only spins the record. Well I spent around $800.00 for a turntable, arm and cartridge back in the eighties which was a chunk of money back then. 

That was some of the best money I ever spent in my audio system because it made the biggest improvement in sound quality I ever heard in my system at that time. 

I would say for your budget the audio store is not off base. You could tweak it a little if you like a receiver lets say for $250.00 and spend $150.00 on the cd player..

You may get bitten by the audio bug like most of us on this forum and in the future, this system will be a distant memory... Good Luck with your new system..