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The bottom line is, yes, you can get great sound out of bookshelf speakers, and in fact many people prefer the sound of bookshelf speakers over towers (I'm a tower man myself, though). As mylan noted, it may also depend on what you're going to be listening to mostly. It would be helpful to know...

Onkyo 5.1 HTIB for $299. I can't post the URL, but go to shoponkyo.com.

I haven't heard the Hsu, but I'm sure you can't go wrong there. I have the recently discontinued Dayton 12" in a larger room. I also listen to a fair number of SACDs and DVD-Audios. I think the Dayton is terrific for music Not at all boomy. You can hardly go wrong for $120, and you can always...

I have a 20-39PCi in a similarly sized room. I think you'll be very pleased.

I also have a pair of MMGs up front with a 92" diagonal screen. I run the MMGs in phantom mode, and the dialog is anchored to the screen. Highly recommended!

My first set of HT speakers was an HTD Level One 5.1 set (now discontinued). Amazing sound for $150! I recently auditioned a pair of their new Level Threes with the ribbon tweeters. Loved the sound, but I found another pair of speakers that I liked just a wee bit more that cost a little bit less...

I can't post the link, but you should check out the sales going on at AV123. You can put together a 7.1 system with Onix Ref 0.5 speakers and a sub for $1300.

If you're interested in the Rockets, check the AV123 B-stocks on Monday. They're having a 20% off sale on the B-stocks, and you should be able to get a great deal; you can also buy a gift certificate between now and Wednesday to get a further 5% off. Check often as they'll be updating the page...

The price on the subs has been lowered again. Get 'em while they're hot (and cheap)!

You may want to go the AV123 forum to see if you can find anyone in your area with some Rockets to which you can listen.

I would second the Maggie solution if you can swing it. However, if that doesn't work out, there's a good review of several on-wall systems from January 2004 you might want to check out at Sound & Vision's website (I can't post the URL as I don't have enough posts yet).