In over my head.

I am in a little bit of trouble trying to find a good audio setup for my dad. I have been following the audiophile press for a while now and figured I'd be pretty qualified for the job.. Unfortunately he has a two room setup and I've discovered I might need a little help in an area that I have absolutely no expertise in, and I can't find much literature on.
My dad has two connecting rooms, one is around 160 sq/ft which is basically a little cove off the larger 6-700 sq/ft room. My dad wanted to set up a little home theater in the cove and have good sound for music in the main room. He doesn't want to spend more than 2K$, so my initial plan was to throw a cheap and cheerful all in one HT setup into the cove, and get a nice(for the price) stereo setup in the main room (I was thinking something like Totem Hawk coupled) with around 6-700$ in amplification. Now it has occured to me that a) the hawks might not be able to fill the main room and b) it seems silly to have two amps in adjoining rooms. The redundancies make my setup look quite inelegant.
So I figured the wizards at Audiogon would probably know far better than I how to configure this. I've looked at a lot of websites without finding very much information about a multiroom amp. Can any of you recommend an amp that could provide HT to one room and Stereo or Surround to another? Or is there some kind of switching system that I can use that doesn't degrade quality? Also anyone have any idea of what a good speaker solution under 1200$ would be for the big room?

Any help would be greatly appreciated,
Patrick