Quick answer -- M2s are more accurate, Atoms sound better without a sub. I own both... the main thing is that I was pretty happy with the Atoms as standalone speakers but the M2s were just a bit too thin in the bass for about half of the music I listened to...
With a sub, it's a different story. The M2s are extraordinarily good with a sub, and the only reason for getting bigger speakers at all is that they won't give you that "wall of sound" SPL without serious dynamic compression.
The Atoms will play quite a bit more loudly than M2s and sound pretty darned good -- the main downside with them is what seems like a big response peak in the 150hz range... probably a side effect of the tuning that gives them decent bass and lets them play loud.
My Atoms are going to go into a mini-HT setup for my parents; I'm keeping the M2s, if that helps. Here's an old thread with my comments on a cold Toronto night just after I bought the Atoms :
http://www.axiomaudio.com/boards/showflat.php?Cat=&Board=ST&Number=74331&page=&view=&sb=&o=&vc=1
EDIT -- it's a shame your height budget can't stretch to 13.5"... I think M3s give you the best of both worlds... very nearly as accurate as the M2s, able to play loud like the Atoms, but without as much of the resonant mid-bass peak.
