Scorpio make a great case for budget...its all about compromise...
Well QED, you do have a choice. I wanted to have a small set up that would afford me with the same requirements as you, although I had to live in a small apartment. In order to address some of the issues, read children, the speakers had to be off the floor. I did not have the choice of in-walls as the apartment was rented. What I finally ended up with was a 5.1 set up using Canton Plus XS
speakers with a Canton AS 20 SC Subwoofer. I have to say, the system sounded better than I thought it would, and hence its a recommendation if you like. Canton have currently revamped there models and you should be able to find something that suits, they also carry in-walls if you still want to go that way.
I would say that if you went via something like the Plus XS, you could always upgrade at a later date, (when the budget allows for an upgrade to something better), to tower speakers or anything that you fancy without having to patch up the walls, when the little ones are older and less…destructive!
As for sound quality, very good bang for the buck…easy to live with and impressive overall, just power them with reasonable amp and enjoy.
I have included some picture for you to see the set up…whilst the surrounds are less than optimum, they did the job and many a great movie night was had. The night pictures are just to show you how it all fits together when in movie mode.
Cheers...hope this gives you some ideas on what can be achieved on a budget...
Dapper Dan...