I came in the other day and I smellled smoke coming out of the receiver/amp. Now the red power light is constantly flashing, so I'm guessing it got burned out.
First off, is there a fix?
If not, what is a cheap alternative - do I have to buy a whole new surround sound setup (speakers, wires, etc) or can i just buy a new receiver?
If its the new receiver I have to buy, then what qualifications should I look for so it can match up with my speakers?
Before considering keeping the speakers, the first thing I would worry about is why you "let the smoke out" of the receiver. If there is a shorted speaker wire and you replace the receiver it will simply fry the new one.
A simple inspection of the existing wire from the connections all along its length looking for any damage or severe kinks should do.
The next question becomes then how happy were you with the Koss system? If you really don't know and really don't care then another really inexpensive HTiB may be perfect for you but since you are on this forum asking for advice I suspect (hope?) that may not be the case. Perhaps we can have you join a lot of us in a lifelong passion of slow and steady audio and video upgrades!
BTW - it is not likely that any repairs can be made these days for less than $100 or much more so I am assuming that there is very little point in looking into that.