I would definitely hunt craigslist for a good deal. I've seen some very nice Treks and Cannondales in my area in the 500-1000 range and with a budget like yours you'd end up with a really nice 2011 or 2012 model.

I live in a smaller town and check out what I found locally.

http://stillwater.craigslist.org/bik/3580928096.html

http://stillwater.craigslist.org/bik/3561806667.html

I saw real nice Cannondale on there for $500 but someone must have picked it up already.