Here's my setup, it's not much but atleast I'm playing in HD with surround sound.
Just a few notes:
I love my sub, don't know how I managed without it, coupled with surround sound it improves your game experience tenfold.
The TV is only 17" but HD from the 360 looks great.
My gaming chair, it's as old as the hills but it's dead comfy, and the surround sound speakers behind it fit in just perfectly.
Ignore the wires, I suck at hiding wires and kind of gave up, so they're a "work in progress"
There's no PS2 there because it's hooked upto my bro's TV.