In wall speakers for cheap HT system

I am looking into building a very cost effective (read cheap) HT system that would provide better value than a home theatre in a box (now you understand cheap). I have a dedicated 2 channel Linn system that I use for music so the HT will be used only for film sound (separate rooms). The HT / study room is small (8’x8’) and will also function as a 2nd bedroom (pull out Murphy bed). With all this going on I have very little room for audio and video gear.
The video is a 32” wall mounted sharp lcd and I was hoping that the speakers could be all but absent so I will need to look either into tiny monitors (polk) or perhaps some in wall speakers.
Has anyone had much luck with either Polk or B&W in wall or perhaps OEM in wall? What about in wall subs???
Suggestions on 5.1 integrated processors / amps would also be greatly appreciated. Perhaps a second hand Denon?
Here's a decent sounding & inexpensive HT system. Total Cost is $650 and it will sound much better than an all in the box system:

1. Acoustic Research HC-6 HT Speaker System . Listed at $799; discounted to $350. Well reviewed. Sweet looking piano gloss black finish. Includes 4 satellites (7" X 5" X 5"); center channel; and subwoofer. Accessories4less is an excellent internet company to do business with. I heard the AR system at a show and it was very life like sounding with movies. I recommended the AR's (and the receiver below) to a buddy, who uses this system in a finished basement area that is used for entertaining. Speaker size needed to be small and not interfere with the overall flow of the space. You will need to shop around for a good price on speaker wall mounts, if you want to go with near ceiling; in corner angled placement.

2. Onkyo 601 HT receiver . Listed at $500; discounted to $300. Free shipping. Excellent sounding with movies; decent with music; and good build. J&R Music is an excellent internet company to do business with.

You could also go with the Onkyo 502 and shave another $60 off the price and have a really decent HT system for $590,

Given the room size (8 X 8), you really should consider 2 channel HT and use the DVD player to provide simulated surround sound. In my last apartment, the master bedroom was 9 X 10 and it did not take too much volume to make that room sound real loud.

Regards, Rich
Naaaaaa...I like the little infinity TSS750 or TSS450 system's for you, mounted on the wall. Otherwise, little Boston acoustics inwalls, as your plan. Still the little infinities, with a Denon receiver(warmish) will be a killer, audiphile, budget, HT system. They're also brushed silver, are small, and sound good.