Home Theater In a Box?

Outlaw Audio Receiver. Check out the new retro model ;)

http://www.outlawaudio.com/

Gallo Speakers will look good with Aquos. Lots of mounting solutions to choose from.

http://www.roundsound.com/default.htm

Magnapan offers a cheap on-wall solution as well.

http://www.hometheatersound.com/equipment/magnepan_mmgw_mmgc.htm

I second the Gallo speaker recommendation (www.roundsound.com). Although you may be better off with a non-Gallo subwoofer. The speakers have amazing sound, small package, versatile mounting options and aesthetically will complement your LCD TV quite well. They'll also be excellent for music.

As for a receiver it has been a while, but in the past I've liked Marantz and Rotel. Cnet has some good reviews on A/V receivers.

Third on Gallo but if uou can swing the Due with the film tweeter mounted between two ball for your mains do so.You rae goingto want listen to tunes optimally as well.Magnepan would be ebtter butnI siincerely doubt you culd get your center speaker let alone system for the price.Lastly see if there are any Cambridge Soundworks stores in your arrea or get return gurantee on both Gallo (tell'em iot's size dependent or whatever) and pcik out a Cambridge Soundworks system to matc budget.I also think at that price point Infinity would be good option.$1200 is not going to quite buy as much as you might think so laso think hearing at shop and buying used.
G'luck
Chazzbo

Thinking outside the box and about your space limitations, take a look at the Yamaha ysp series. Its right around your budget limits, but much below if you buy online. I've demo'd it. With the matching small sub ($200ish), its an amazing solution.

S.

Negative on all of the above. Newbie college students should not be going with "essoteric Galo's", or the "Magnapan route!!!!" (old audiophiles from the 70's maybe...lol)
Stick with dynamic piston traditional designs. Packages you won't go wrong with are the Polk $1k HT in a box system (forgot model), with a Harmon Kardon REceiver, or the Infinity TSS750/1100 systems, driven by Denon receiver.