Cheap isn't always bad. I got my Konka KD-1800U from a local Fry's Electronics for $127, it's a nice piece with Dolby Digital output (optical and coaxial) and DTS compatible (although not mentioned anywhere in the manual). Best of all, it has an infamous hidden menu that allows you to turn off region check and macrovision copy protection, so that you can copy your own DVDs to video tapes.
http://www.usaleauction.com/regionfree/konka_1800.htm
If you don't care about the region check stuff, check the Apex AD-600A at your local Circuit City store for $179, it has Karaoke built-in and can also play MP3 and VCD discs.