I recently purchased a modest first home and will be installing a home theater in my family/living room area. This will be my first home theater so I'm pretty clueless. So far I've been focusing on what equipment to buy, but in the last day or two I realized it may be more important to choose the best room layout possible. Thanks in advance for anyone who takes the time to read this:

In another post, I attached a file showing the layout I had in mind:
my original theater layout.

Background information: My target budget is $10,000 for the entire theater and $3,500 for speakers and receiver combined, but I guess I'm not totally firm on that. The house is 2 stories and the entire downstairs has a tile floor.

The unique thing about the floorplan of the house is that the wall dividing the dining and family room has a large opening in it. The opening starts at about the height of a typical sofa, and continues almost to the ceiling. And it runs almost the entire length of the wall. So, the wall is really more hole than wall. The nice thing about this is, when I have extra guests, the dining room can be converted into more theater seating.

I have three questions. First, would I likely get a significant improvement in audio by using a "mirror image" of the above layout? Ie, should I use what I labeled the dining room as the family room instead? I am mostly concerned about weird acoustics stemming from placing the speakers in the corner of an "L" shape... I can say that the empty space resonates quite a bit, like if I hum or sing a sustained note or something. In the "mirror image" scenario, I'd have something closer to the rectangular shape that I've read is desirable for home theater. Would it be a good idea to walk around through the downstairs humming, find places with lots of reverb, and avoid placing speakers there?

Second, the a/v installation guy that came by the house acted as if it is an absolute given that I should get a 7.1 system. But it seems to me that a 7.1 system will be counterproductive here. My understanding is that in order to take advantage of the extra rear channels, they need to be placed about five feet behind the sweet spot, just above ear level. Whether I use the original layout or the mirror image, this would amount to two speakers sitting on my dining table(I'd have to keep moving them on and off from the table, but maybe that's not totally out of the question either).

On the other hand, I could attach the surround speakers in a 5.1 system to the inside of the opening in the wall between the family and dining room. I think this would be pretty close to optimal placement anyhow.

Finally, although I will use rugs, and possibly theater-style curtains to dampen reverb, I also realize that I am dealing with a sub-optimal space, and that tile is sub-optimal. There's only so much I can do with the space and my budget... this makes me less inclined to splurge on high-end audiophile speakers and receivers. My thinking is, without the proper room layout and acoustics, one will experience diminishing returns much more quickly when it comes to spending money on speakers and receivers. Is my thinking correct here? Or should I try to budget more toward sound because the space and acoustics are less than ideal?

again, thanks in advance...

[edward]

Hi myoo.
1) I think the dining room will probably be even more of a challenge that the room you've chosen.
2) I agree with you - 7.1 isn't for you just yet. Rear speakers really do sound best when they're a bit behind you.
3) Rugs can do really good things - I've even got some fairly heavy silk ones on the rear wall and they work a treat. Of course, the purists with fancy interconnects on their system will be able to hear the difference between silk and wool rugs, Persian and Turkish carpets... but for the like of you and me, probably any thick rug will do.

Good luck. Let us know how you resolve the compromises you'll have to make.

[edward]

Think carefully about your choice of display too. Some technologies only look good if you're directly in front of them - meaning in your set-up the views from the char might not be as good.