Hello, again...

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we were also thinking of putting the wall mounted speakers inside a portion of the cabinets (built outwards so they aren't in a little hole) with the fabric stuff across it



So, not exactly in a cabinet, right? Rather, build the cabinetry so that the front of the cabinet becomes - in effect - the "wall" for the in-wall speaker? That could work! You just want to make sure there are no hard surfaces adjacent and perpendicular to the plane the speakers are mounted on. I wouldn't want - either aesthetically or performance-wise - to hide the speakers behind additional fabric if you could put them on the "front" of the cabinet. I'm thinking custom finish W22's

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Above the screen might work, though I suspect we might end up having it a bit above eye level rather than a bit below.



It's been a while since I seriously considered (but ultimately scrubbed) the idea of front projection, so I'm not the greatest source. However, don't you want to have the screen itself extend below eye level ideally? I seem to remember thinking 25-33% of the screen should be below eye level. Consequently, mounting the center channel UNDER the screen would make it nearly on the floor. I really think you're going to get better performance mounting it above the screen. In addition, unless your cabinetry extends above the screen also, you might even want to consider a VP150 and FMB combination to get the center channel out of the cabinet "hole" and closer to the same plane as the mains.

You can probably tell I'm intrigued by this kind of puzzle

Regarding the sub, I don't know where you're located, but that matters somewhat. Hsu and SVS subs are also highly regarded, and offer a few more options at price points between the EP350 and EP500. SVS is expensive in Canada, I believe. Many satisfied customers around here. The thing for you is that you'll either need a hella lotta technology (the DSP in the EP500) or a pretty darn big box in order to move enough air in that room. And yeah, even though you're only "listening to half the room" you still have to worry about the overall volume.

bibere usque ad hilaritatem