I am looking for a pair of speakers for use with my stereo. Looking for something less then $500 for the pair (this should include suboofer or be a set that does not need one). Prefer something on the smaller size. Suggestions?
Depends on how much low end extension you like and your listening preferences (material, volume, etc.)
I have not found any sub/sat system in the under $500 price range to be satisfying.
There are a few bookshelf speakers in this price range that are very, very good
PSB Image B25 Epos ELS3
In a small to medium room, the Paradigm Monitor 5's (MSRP $579) will give you what you're looking for without a sub. I'm not sure if they fit your definition of "on the smaller side." They're 21" high -- tall enough to include a bass driver along with the mid-range and high frequency driver.
Most Paradigm dealers should be willing to come down a little on the price but you may need stands for these speakers.