I think I am going to go with the RSL c34E MKII celing speakers per your suggestion.
Since I will likely be getting the premier 500c as my center channel what are you thoughts on going with the 200b in paradigm's premier line? Or should I stick with the 40Bs? I really wish I could get some floorstanding speakers, but my built in cabinet does not really allow for it.
I'll second those who've suggested putting most of your $ into the LCR speakers in front. Make sure you havea good starting point and upgrade the other speakers later if need be.
The surrounds are going to be a challenge. The following may or may not be useful (it is just my experience with one system, so take it with a grain of salt). I have a 5.2 system in a somewhat similar room, but the sofa is against a wall so there's no room in back of the sofa. I mounted JBL studio 220 speakers on the wall in back of the sofa using VideoSecu MS56B 3LH mounts out to the sides away from the ends of the sofa. The 220s are quite close to the sofa, however, due to the wall on one side (I have an end table between the end of the sofa and the wall, but the 220s are only about 2 feet from the ends of the sofa). After experimenting with the angle of the surrounds, I settled on aiming them slightly forward of the sitting position (I would not have thought this was the best direction, but it seems best to me). This is far from ideal (especially if you're not sitting in the center of the sofa), but I like it better than no surrounds.
My best guess is that Wardog's suggested placement for the surrounds is probably about as good as you're going to get. If possible, I'd use bookshelves on adjustable mounts so you can experiment with the direction.
In the system described above, my front LR speakers are Philharmonic BMRs. I have not heard the other LCR speakers suggested in this thread so I have no way to compare, but I've been impressed with the BMRs. I can't prove it, but I suspect that the accurate off axis response of the BMRs helps in this situation because the sound that's reflected off the side wall on one side isn't already distorted at the source. But, as with everything else, don't take my word for it. If you're considering the BMRs, take a close look at the test results and compare them to the other speakers you're considering to make sure they have what you're looking for (there are a cr*pload of factors to consider)
Personally, I really like dual subs but I would still go with one good sub that gets down to 20hz over two that can't get down to 20hz (I think this is basically what Shady was saying). It's a lot less hassle to add a second sub later if one is inadequate than it is to replace a pair that aren't cutting it. In the system I described above I have a pair of Hsu ULS MK2 sealed subs. I'm not a big believer in sealed subs, but I had rather extreme space limitations and the sealed subs appeared to be a better compromise than ported subs of the same size. If space is not an issue, for a given budget I'd go with ported every time.
