Welcome!
Pictures and diagrams help us "visual learner" types
These are fun kinds of threads!
If you don't have any floor space behind the sofa, 7.1 is not going to do you any good.
Personally, I think the Onkyo refurbs at shoponkyo.com or accessories4less.com offer excellent value in receivers. Find one that has the features you want. I wouldn't spend more than about $450.
I think you're compromising sound quality by mandating "onwall" speakers. Perhaps a traditional speaker mounted on the wall? You spend some $ on mounts, of course. Can you do INWALL speakers? That would be an excellent option if you're willing to cut the sheetrock.
At any rate, I'd get M22's, QS8's, a VP100 and about a $400-500 sub.
Sorry for the incomplete reply - I know others will chime in.
