Welcome Stone. Thank you for your service.
Other than the subwoofer, you don't mention budget, which can be a governing factor when it comes to recommendations. Also, the size of the room is a factor, and you've got two, quite different sized, options. But I'll throw out what I can.
The M22s would be fine in the 12x15 room. But, if you end up in the 15x30 room you might want to consider the M60s, or even the M80s, depending on the size of your listening area.
SUBWOOFER: In the smaller room, the EP350, or even a HSU STF-2, VTF-2, or SVS PB10 probably would suffice. In the larger room the VTF-3 is the smallest sub I would recommend. If the budget would allow, for the larger room, I'd like to see you in an EP500 (biased recommendation, since I own and enjoy one), VTF-3 HO Turbo, or one of the larger SVS models (PB12 plus 2, or PB12 Ultra). Those, however, are well past the sub budget you mentioned.
If you're looking for a musical sub, you might consider a sealed sub like the
Rocket UFW-12 or the
ACI Force, or the really pretty
Titan XL. Alas, they are also more than your mentioned budget.
If you must stay within the $500-$700 range, I think the HSU VTF-3 is the best choice.
5.1 vs. 7.1: Either will do fine. Some prefer one, some prefer the other. 7.1 has the advantage of providing ambient sound directly behind you, which fills in things a little better than 5.1, but you won't feel deprived with only 5.1. If you have room behind your seating area, and the budget allows, I think 7.1 is worth it. If your seating is very close to, or smack against, a rear wall, then staying with 5.1 might be a good idea.
Connectors OY! So many choices. If done properly, none of the connections (bare wire, banana plugs, pin plugs, etc.) will have a sonic advantage over the others. Connectors are more convenient than bare wire. I prefer banana plugs, particularly for the connections at the receiver. On many receivers the binding posts are very close together which makes it very hard for my fat fingers to do do the job while I'm twisted like a pretzel behind my equipment. Bananas don't require any unscrewing of the binding posts. You just insert them in the ends of the posts.
I use these
dual banana plugs for my connections to my receiver. If you search that web site, you can find less expensive ones that will do the job just fine. When using dual banana plugs you must be sure the space between the plugs is the same as the space between the receiver's red and black binding posts.
On the speaker end of my connections, I use these
Radio Shack banana plugs. Neither the dual plugs nor the Radio Shack plugs require any soldering, and are easy to install.
DVD PLAYER: Not to worry. You don't sound "lame."
And, yes, many players are available with DVI/HDMI to HDMI connections, and you want to get one of those, if possible. Again, budget would be helpful, as would what you want this player to be able to do. Do you want a "universal" player (i.e., one that can play SACDs and DVD-As), etc.?
With the release of Hi Definition players on the horizon, I wouldn't invest too much in a DVD player at the moment. At $199 plus shipping, a good choice might be the
Oppodigital OPDV971H. It's a relatively new player, and hasn't been without it's problems, but the customer service has been INCREDIBLE, and all problems have been addressed quickly. The Oppo will play DVD-As, but not SACDs. I believe they are soon to release a player that will play both. There are many other worthy players out there as well.
I'll leave it to those with more understanding of the matter to fully explain "up-conversion." I always confuse up-conversion with upscaling, and upsey daisy.
However, I believe that a receiver with up-conversion enables only one, or at most, two video connections from receiver to HDTV.
FACTORY OUTLET: You got it. No major blemishes on Factory Outlet speakers. Many of us bought our Axioms from the factory outlet. It took me two weeks of hard looking to find the blemishes on my M60s, and I would've never seen them if the light hadn't hit the speakers just right. The bad thing about ordering from the factory outlet is the wait.
Have no qualms about ordering from the outlet.
