As much as I love my Onkyo TX-SR500, you can do better. Especially if your max is $400.
For one thing the SR500 does not have Component Input/Output.
Also, for the $100 more you can spend, you get more connections.
Yamaha HTR-5550
Sony STR-DE985
Pioneer VSX-D811S
Kenwood VR-6060
Sony STR-DE885
These can be found from anywhere from $300 to $400
The H/K AVR-125 is not a bad beginner Reciever, but it lacks Component Video Switching. You start getting Component input/output with the AVR 325, but thats also around $800
And unfortunately, the Denon AVR-1403 doesn't even have S-Video Inputs/Outputs. So that would severly limit any upgrade path. The next step up would be the AVR-1603 which has Composite, S-Video and Component.
On your list, the HTR-5540 would prolly be the best bet, but shop around, do some research and see what kind of inputs/outputs he needs.