Ask Engadget HD: Best home theater setup for small spaces?

Let's face it, not everyone has $60k to drop on a dream home theater, and even they did, might not have a place to put it. If space is your major constraint, like our guy Geoff, achieving the best setup can be quite trying:

"In a previous lifetime circa early 2000s, I had a dedicated media room and the latest in technology. I'm closer to the city now and square-footage is a premium. Knowing that I'll likely be in an apartment/townhome/condo for the foreseeable future, should I try to use some of my old components (listed below) or just sell them and start new? Keep in mind that I doubt I'll be able to mount any rear channels, so I'm thinking the setup with either have to include rear satellites or be a 2.1 system. I don't require a movie theater-like experience, rather something that's extremely solid for movies, music and gaming.

-- Sony STR-DE945 receiver from 2000 (i.e., no HDMI)
-- Klipsch Quintet 5.1 Home Theater circa 2000
-- No Blu Ray player
-- Xbox 360 Elite and, sadly, HD DVD add-on
-- Samsung 42-inch LCD (perfectly fine)

I've been following the new HTIB offerings from Sony and LG, thinking those might be the answer since my budget is probably around $600, not including whatever I can make on the sale of the above. The Sony system seemed attractive since Blu Ray was incorporated.

There it is, we know your palatial estate is covered with inflatable screens and the like, but condo and apartment dwellers need love too, and not at too high of a price. Let us know what you'd put in that type of space.

Got a burning question that you'd love to toss out for Engadget HD (or its readers) to take a look at? Tired of Google's blank stares when you ask for real-world experiences? Hit us up at ask at engadgethd dawt com and keep an eye on this space -- your inquiry could be next.