Your budget gives you a number of alternatives. There's Paradigm , Axiom , Definitive Technology , Boston Acoustics , or Klipsch -- all of them make systems that would fall within your price range. The new Rocket speakers will probably fall outside your budget if you also get a decent sub. I won't mention SVS subs, since you mention that space is at a premium.

Personally, I've been very happy with my Paradigms, although I do use the Reference line (which would probably not work with your budget). There are a number of other satisfied Paradigm users around here, as well as Boston Acoustics, Axiom, DefTech, and Klipsh users. Any of them would be worth a listen at a local shop (using some of your own music or movies as demo material).

Other suggestions...?

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