Making the best of mediocre speakers


I want to get the best system I can, given unfortunate constraints. I'm building a new 2-channel listening system in a new apartment, and my wife insists the speakers in our 17x23 living-room must be in-walls. They fit into a particular lowered soffit, so they'll be installed just above head height. The Sonance Z4s are the best I could find to fit the area; they're OK, but obviously this is a compromise.

So I am planning on a nice subwoofer (which, btw, must also be in-wall), maybe by James, to beef things up. Then about 3K for separates--I am considering a Rowland 102 amp, a Rogue Audio Perseus preamp, and a Cambridge or NAD CD.

My question is, am I wasting money, given the in-wall speakers and placement? Do a nice sub and electronics make up for the speakers? Or should I throw in the towel and just get an Arcam Solo or something?

Many thanks.
price
I change my statement, if large on walls are acceptable, Id also go with Magnepan. Fantastic speakers.
Marty is right that one doesn't need in-walls to start a feud with neighbors. I'd expect in-wall would be less problematic for a wall that did not communicate with another apt. (in addition, construction details might prevent installation for some communicating walls), but I'd in general expect in-walls to transmit more vibration, all else equal. John
Thanks everyone.
It's an apartment I own, and the walls in question are interior to the apartment, so no neighbor issues, luckily!

The main problem is that due to the weird layout of the room, with doorways and so on, there is no real area to do a proper wallmount, only this soffit. The soffit however is only about 8 3/4" tall, which means that, even assuming the speakers would be mounted on their sides, is quite a limiting factor. It certainly means a subwoofer is crucial, as these are essentially tweeters alone, at that size. I think the Magnepans don't fit that area...

I've been looking into B&W, which has some decent sounding in-walls that may fit; paired with a good sub it might just be possible. If anyone knows of a small in or on wall speaker with an positionable tweeter, that would be amazing.