I love my Klipsch in-ceiling speakers, with a Paradigm sub. This is a stereo system in a living room that is not my primary critical listening system.
I would think in-ceiling speakers would be fine for rears in a surround system, with in-walls for front and center channels. Your budget might be stretched, but you might find a deal on the web, or used speakers on Audiogon. To stay within the budget, I would suggest skimping on the sub, and trade up later.