Well infinity is ok, but personally with $175 budget there's not much you can do, but you can do better than Kappa 63.5is. I'd swap out the fronts with CDT CL61As which will eat those inifinity for snacks http://www.thezeb.com/detail.aspx?ID=1083 These are component drivers meaning a separate midbass and tweeter(the little speaker responsible for delivering high freqs), and I'd just leave the rear speakers as is, they do ok for rear fill. Having the tweet mounted higher will help you hear the highs better, and the CDT components have a much smoother high than the tinny sounding infinity coaxs.

Subwoofers are a way to add extra bass to a system. There's no real need for it unless you're into pounding your brains in(like I am) and you plan on spending MUCH more money on your system, as you'll need an amp, and a all kinds of other goodies.