It has been a long day, so let me make a few brief comments.
There are stable 7.x.4 receivers, but they aren't cheap.
No, they definitely aren't
The $700 Atmos receiver is lacking some bells and whistles, but depending on his room size, a 5.1.2 setup could work just fine.
So in the right room it would be noticeably better than 5.1? That would be good news.
You did mention that there is no room for ceiling speakers, why is that?
No room as in nowhere to plug them in to the receiver. From your description one of the surround channels is changed to a ceiling assignment? I don't think he has a very large space. Its an L shaped basement.
