I agree with slipperybidness about the sound qualities of the speakers he mentioned. You may like them a lot better than what you now have, unless your ears are addicted to the Klipsch sound.
Given your budget of $1000 to $1200, and your shelf size limitations, the Ascend
CMT-340 SE and
CMT-340 SE Center are probably your best choice. They are 21" tall × 7.5" wide × 10.5" deep.
They're sold internet direct, and offer a return policy after you've listened to them in your home. This maker has an excellent reputation, and these speakers, with a sensitivity of 90-92 dB (measured with 1 watt driving the speakers with a microphone 1 meter away) will handle a larger room with no problems.
Your room may not be as bad as you fear. The distance between the listeners and the front speakers is more important than the overall size of the whole space. Furniture and rugs can help a lot with bright sounding reflections.