May want to consider demo'ing a pair of Ascend CBM-170s (upgraded version of these out in the next two months if you can wait) along with either an HSU STF-1 (recent favorable review here on Audioholics) for a bit under your $700.00 budget or step up to the STF-2 for a bit over your budget. Ascend offers packages on their website for these configurations.
Another consideration would be the new SVS SBS-01 bookshelves with a PB10-ISD, bringing you to just under your budget. The PB10-ISD would be a significantly better sub than the two aforementioned HSUs, but is also a bit larger and may not be a good "fit" with this room config. For another approx. $200.00, you could opt for the 5.1 package from SVS, but this might be overkill for your listening purposes.
Yet another option for you could be the Ascend 170s with a DIY sub kit from Parts Express, lots of good feedback on these. Your room configuration doesn't sound as it would be too terribly sizable, but I think the "bang for the buck" with the above would be worthy of serious consideration.
I myself am considering an upgrade in my main HT to the new version of Ascend CMT-340s due to their 30 day satisfaction guarantee and the positive reviews in regards to musical performance. With the only negative impact of the return shipping cost, this is a relatively low-risk option, allow me to hear these in my environment and ample time to condsider whether these will be a worthwhile upgrade to my existing mains.
Good luck on your search and most of all, have fun with it!
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-TD