Imind, since your 1050 also has a variable crossover, in addition to the sub crossover, it wasn't entirely clear to me which one, or both, that you were referring to when you mentioned various crossover frequencies which you tried. I'll give you my opinion. You paid good money for an excellent sub and you should use it in the frequencies where it gives better performance than the M2s. This means up to around 90hz. Yes, it can be localized at this frequency if it remains right next to you behind the couch. Despite what you've said, find some space near the M2s, even if you have to go to the extreme of using the VTF-3 as a stand for one of the M2s(not really recommended).
Next, on the crossovers. I'm not sure where it's been "popularly advised", but if you set speakers "small" the sub crossover on your VTF-3 shouldn't be set at 60hz or anything else. The VTF-3 has a bypass which completely removes its crossover from the picture and this is the setting to use at "small" so that the cross in the 1050 takes care of all the bass management. It's incorrect to think that somehow the sub crossover can improve the "blending" or "integration" which has already been accomplished by the receiver cross. It can only cause harm, that's why the bypass is there.
Considering the bass capabilities of the M2s, the 1050 crossover or filter should be set at 80hz, speakers "small" and sub cross bypassed.
