Like Matt said, yes. However, before you happily capitulate, wait till she's out of the house, and then go into that room, sing, yell, bang pots 'n pans, and bring your speakers in there to see how it sounds. The biggest issue, maybe the only issue, is acoustics. OTOH, if you can go full blown dedicated, then you can supersize the screen with a PJ, light control, etc.
Maybe a JL F112 (or two if you even need it), an Epson PJ (or JVC if you can sport the cash), a few HT recliners, etc.
This guy's room is about the same size, and with a total budget of maybe a JL F113, did he do a full dedicated. Now, the equipment is less than desirable, but check out how nice it can look on such a small budget!
http://www.avsforum.com/avs-vb/showthread.php?t=896437
edit: I want to say that my own BR's have absolutely horrible acoustics. I would in fact say impossible, I mean, outside of tearing all the walls out and finding as many sources of ringing and slap echo as I could.