I am purchasing shortly for a VERY similar setup to yours (sectional couch opposite the TV against back/side walls).

I am going with the M60/VP150/QS8s and the EP500...

If not for some setup problems, I'd go with M22s. However, my sub placement will be in the back of the room (there's a "hole" behind the corner of my curving sectional couch)... so I'm going with the M60s to spread a little bass to the front. (Dunno if it will work.) If I could get the sub in front, I'd go with M22s for the fronts... and my room is a bit bigger. (The Axiom Rep actually still suggested I go with M22s, despite rear sub placement...)

I'm going with the VP150 because I will be using a stand to put it in front of the TV (I have a big-ol' CRT with the receiver, etc. on top)... if I were about 2 feet closer (I'm about 15 feet away) I'd probably use the VP100 (especially with M22s) and figure out how to get it on top of the TV.

5.1 with QS8s would be my suggestion. Opinions are split on whether 7.1 is even all that great... and certainly, in your room, 5.1 is the way to go. I'd go with QS8s for several reasons: First, the quadpole surround is one of Axiom's best... supposedly a GREAT multi-pole surround... so get the "best" version of their arguably "best" (at least highly rated and unique) speaker. Also... the drivers in the QS8s match the drivers in the VPs, M22s, and the tweeter/mid in M60s. The 4" drivers in the QS4s match... nothing. (But they're still supposedly great.) Finally, avoid upgradeitis.

Lastly... EP500 all the way. If you read the reviews, the EP500/EP600 get rave reviews... the DSP stuff, the extension, the output... all a very impressive thing. Awesome bass is key to HT. In my opinion, it adds the most "wow" factor to the HT experience. Great, clean low extension? Awesome. (However... this might be, apart from cost... one of the easier parts of the system to "try out" and upgrade in the 30 day period. If you buy the EP350 and are blown away... great! If not, send it back and get an EP500. But I'd just go with the EP500 so you don't have to spend the next few years sorta wishing you had. It's admittedly pricey, though.) A side note... if you do a lot of reading, you'll see a guy named Craigsub, a reported sub guru, rated the Hsu VTF3MkIII over the EP500, and it's $475 cheaper, shipped. Bigger than the EP500 in size though, and doesn't match the finishes if you aren't planning on black.

Anyway... my recommendation is M22s, VP100, QS8s, EP500. Good stuff.