While I agree that a phantom center image can sound terrific on a properly set up stereo pair AND it can be very challenging to get satisfactory results from a physical center-channel speaker relative to your mains, I think it's important to remember that the standard specification as defined by Dolby in a surround-sound playback system intended for movie soundtracks calls for a physical center-channel speaker. The Dolby spec will "fold down" information in the "phantom" setting to make recordings encoded in Dolby surround backward compatable with two-channel systems, but try inviting five or six friends over for a movie and trying to cram everyone into the (fairly narrow) sweet spot. In most rooms/setups this is just not practical. The center-channel serves to anchor the on-screen dialog and effects to the video image and broadens the soundfield dramatically. In fact, the original spec for what we now call "stereo" actually started out as a multichannel (3 or 4 channel) format used in the commercial theaters of the 40's and 50's. Two- channel stereo for music playback was a compromise made necessary by limitations of the good ol' needle-in-the-groove record. (they hadn't figured out how to encode a "quad" mix until much later). You can get the full scoop of the history and timeline the development of stereo and multichannel recording and playback on Dolby's website. It's an interesting read.
The point I'm trying to make is that a center-channel speaker can sound great when it's a good design and it's set up properly.
My center speaker is a horizontal design, (Hales Revelation Center), and I think it works very well with my floorstanding Revelation Two's. The designer Paul Hales added a midrange driver between the dual 6 1/2" bass drivers to alleviate most of the "lobing" you hear off-axis in the critical midrange on the typical "woofer-tweeter-woofer" designs that many others use. More expensive? yes. Worth it? YES.
One trick I'm using that I learned when I was 'in the biz' is to use acoustic damping material around the center speaker if it's placed in a cabinet as many people do. Remember that any speaker, even a monopole, actually emits sound energy in all directions. Lining the shelf on all sides with the right material will slow down soundwaves and make the speaker sound as if it's positioned in a larger space. I've found that this will reduce the "cupped" or "beamy" sound that is so common to center-channel speakers when they are positioned very close to acoustically reflective surfaces.
Owens Corning makes a product that works very well for this purpose and is fairly inexpensive. It comes in 2'x4'x2" sheets and is made of fiberglass that is compressed so it's fairly rigid and can easily be cut to size. The shop I worked for spec'd this material for their in-wall speaker installations to acoustically damp the area behind the speaker (most in-walls have an open rear (no box)) with very good results. This material can be messy so I covered mine with speaker cloth puchased at a local fabric store.
As I said, you may have to work at it, but the results can sound excellent!
P.S. I heard through the grapevine that Paul's right-hand-man at Hales (Larry Reagan) is now with Thiel. Maybe some great new product in the HT arena is in the works at Thiel!
