Thanks to all of you for the wisdom. I had to laugh when someone brought up bedroom 5 - that isn't really a bedroom, it's an office for now, but will have sound batting in the wall.
To answer some questions: yes, looking to do in wall/ceiling install. The boss will not allow speakers sitting on the floor no matter how pretty so I'm working within what I've been given. This is in Dallas so I don't know if there is a good alternative on craigslist - I wouldn't immagine that people are selling used in-wall or in-ceiling speakers.
I was considering using http://www.klipsch.com/r-2502-w-II-system/details and adding http://www.amazon.com/Yamaha-RX-A740BL-7-2-Channel-AVENTAGE-Receiver/dp/B00J8HV5D2
This puts me at about $2200 but I think would make this room really rock for watching movies in, but since I'm not an expert - I defer to yall. Thanks again for all of your help.