Where do I start!!!
First, let's dispel the myth that in-wall/ceiling speakers are not as good as their boxy siblings. Manufacturers are making sure that they are. If you would prefer to go with in-wall or ceiling then don't hesitate to do so. I have two pair of Paradigm in-ceiling CS-60Rs ($200) and am continually amazed at the quality of sound that these relatively inexpensive speakers put out. Unfortunately, the specs on most of the KEF in-walls are not that impressive with the exception of the reference types.
For surrounds you can use other brands with good results. Not knowing your room limitations let's look at your options. Generally, bi/di-pole types are preferable but they are not abundant and may cost more. Direct radiating are plentiful, available in a wide price range, and may suit your needs just fine.
As an example, I am using Def Techs for everything except my L/R which are my 24 year old ESS AMT Monitors. The center is Pro Center C2 (probably should've gone with 2000 or 2002). The side-surrounds are bi-polar in-walls (UIW-BP). The grills protrude about an inch or so, which some may have an issue with. The rears are in-ceiling (UIW 64/A Reference) because of my room layout (open to rear).
http://www.definitivetech.com/loudspeakers/inwall_/inwall_.html
As to your last issue the salesman's advice, complete balderdash. Many older audiophiles have decades old speakers they would take to the grave with them if they could, but continue to upgrade their equipment as need (or desire) warrants. I am using the Denon AVR-5800 for my 7.1 system with a separate amp powering a second zone. For your purpose not knowing what it is, the 4806 may be all you need, the 5805 may be overkill. Spend the money on a good quality sub or two. Again, I like the Def Tech SuperCubes. Though many on this site will recommend SVS and HSU subs.
http://www.definitivetech.com/loudspeakers/subwoofers/subwoofers.html