Newbie needs help

1. There are actually equations that can be used for distance calculations but in essence, what the other posters are saying is correct; its hard to get channel separation with 4.5 feet for three speakers.

2. In general a larger cabinet/drivers allow for more air movement and lower frequency response. There are flat speakers/like those from Magnepan, that take a different approach. Most receivers can be set or are preset for the standard 80HZ crossover point, the frequency at which signals below 80 HZ are sent to the subwoofer while above 80 HZ is sent to your 5 audio channels ( or 6 or 7 etc). Its not an exact cutoff so the bottom line is check your frequency ranges on your speakers you pick and try and be sure your center, L, R, and surrounds all extend down to at least 75 HZ and prferably lower. Many satellites do not.

3. Its nice ti pick your 5 channel speakers from the same brand so they produce a match in audio handling. It isnt necessary to spend big bucks to get what most consider a reasonably satisfying result, and used speakers are quite acceptable in general as well.

6. Your subwoofer choice is important. There is a thread at avsforum.com where many many subwoofers were tested throughly against each other. Find one on that list that is affordable for you and go for it. They are all pretty darn good. If none are affordable then you might consider an HSU subwoofer ( one of them is on the list FYI) that meets your budget. HSU subwoofers make sense from a price/performance ratio consideration.

Have fun. PS- I like Denon receivers at any price point for basic Home Theaters.

FWIW, here's my opinion.

If you are using little cube like Bose type speakers, then five feet may be okay, but you would still have to be sitting very close to them. You need some separation or you might just as well be running a single mono speaker rather than stereo, or multichannel speakers.

In-wall speakers can be pretty good. They're certainly convenient. However, you can't move them about a bit to get optimal placement. It's a "lifestyle" or design choice rather than an attempt to get the best quality sound when you go with in-walls. There's nothing wrong with that if you're looking for background music or want a multi-purpose family room home theatre. I wouldn't spend a lot of money on it if that's the application intended though. No point spending a lot of money on an exceptionally high quality set up that you can't take advantage of. A $2000 budget for receiver and a full HT speaker package seems appropriate for this type of application. People here can certainly give you good advice as to what brands to look at.

I do not quite understand what you mean by distinguishing satellite and bookshelf speakers. To me, they're the same thing, i.e. small stand mounted, wall mounted, or shelf placed speakers with limited bass response because of their small size.

I agree with Tvad. If the left/right speakers are only 4.5 ft apart and you're seated say 8-9 ft away, you will not get the channel separation that is the intent of surround sound. In other words, you will not be able to distinguish the left/right speakers from the center speaker in most cases. If 4.5 feet is absolutely all the room you have, you may be better off with one of those all-in-one "music bars" that are intended to simuluate surround sound in small spaces. Or, if you can stretch the distance by going in-wall, I would do that. Even if in-wall speakers were technically inferior (and I don't know that to be the case) they would still sound better, IMHO, because of the separation you would gain.