That approach to placing mic should be fine. If you've already tried the resets, and you consistently get bad data, perhaps it's time to have your Pioneer repaired under warranty....unless you are happy with the manual settings, which it doesn't sound like you are. It could be something as simple as a bad mic, but it could be the avr itself...especially since you're not happy with the overall sound. Hard to know what your expectations are based on, though.
I'm not all that familiar with the speakers other than they generally get good comments, but for your size space I'd go for a larger sub that digs deeper (I want my subs to have a lower response of 20Hz, the spec on yours is 35Hz); of the brands available I'd look to Velodyne or SVS among those (but still don't know which specific subs of theirs are available there).
As to your room diagram, is there a door on the left wall towards the front? Or is it always open? Your room is fairly small and would think if that room can be sealed with a door that even a 10" sub might satisfy, depending on sub, but I'd look to the 12 or 15" sizes myself. What is the height of the room? Is your room furnished? With what?
The Dolby reference may be settings for Dolby Surround, not sure how they apply. I'll try and take another look at the manual later.
