Is it even possible to set up a system in 12x12 room?

Towed in is seemingly dependent on the speaker and the room. In my room, I slightly prefer straight ahead with my speakers, possibly not the case with different speakers. Again, experimentation is the key here.
Room acoustic treatments are possibly more important in a small room than big..again room and speaker dependent would be my experience.
I think there is no wrong or right about the small room set up, trial and error is the key, IME. BUT, once it locks in, you will know it...and the SQ should be excellent...with the proviso that very deep bass probably isn’t going to happen...and neither is large scale. These two aspects take a larger room and large speakers, BUT the off-set is greater intimacy and a more resolved sound in many cases. Near-field listening, again IME, is in many ways beneficial than to listening to music from some distance..in many instances too far due to the size of the room.IMHO.

I am in a 12X13 room and I have never heard a better system in my lifetime of 35 years in HiFi. At shows, at dealers, no matter the cost. Starts with choosing the right speakers. Small ones. Avoid floor standers, and stay with small two way high quality speakers.

I have several speakers and amps I swap out on occasion but right now I am alternating a a Vinnie Rossie L2i SE and Naim Nova with B&W 705 S2’s and Dynaudio Special 40’s. The way I achieve magic here is simple. The room is damped with carpet, window coverings and a couch. Things are on the walls and I also have shelves behind me. The couch is pulled 8" from the wall and my speakers are placed WELL into the room about 6 feet from me (nearfield) and 5 1/2 feet out from the back wall, so almost six feet into the room. They are about 2 1/2- 3 feet from the side walls. They are then angled at a 45 degree toe in. YES, 45 degrees so. they cross a good 1-2 feet in front of me.

Looks crazy but the sound is pure holographic magic with solid bass that never booms but is tight, tuneful and massive when called upon. There is also a sweet silky treble with a 3 dimensional aspect one could never re-create in a larger room. I wouldn’t trade my just about square room for anything. But it is dedicated to only my music. If I place my speakers in a traditional way, 1-2 feet from back wall I will get awful boom and if I pull the out more I have no bass. So I must bring them out farther, a little closer together, 45 degree toe in and listen nearfield. This allows me to literally see through the performance and be inside of it, I can look around and literally almost see the instruments in space. Give it a go if you like, and no treatments are needed if your room is naturally treated already (carpet, couch, etc). 

Oh, and these also sound just as big as my Cornwall IV's in my living room. So I have scale, bass, sweet treble, holographic imaging and a massive wall of sound that goes to the boundaries of the room. Had my audio in this room for ten years and have learned along the way ; ) 

Hey Steve, I actually purchased my pair of Dynaudio Special 40's after reading one of your reviews, and I find them every bit as delightful as you mention. What a beautiful, beautiful sound! I haven't tried the 45 toe as above. I'll give it a try, I concur on the nearfield positioning.