There are in-ceiling speakers with movable baskets that allow you to move the whole speaker something like 30 degrees and then an additional 10-20 degrees for the pivoting tweeter. Anyone who says that the in ceilings won't sound good hasn't heard a set used properly. I have done numerous installs on my own as well as dozens while working for a home theater business; and we used sonnance in ceiling speakers and the sound quality was phenomenal! I have also done a setup with monoprice 8" in ceilings and it sounded badass as well!
On your budget this is what I would look at doing, assuming you have 8-10' ceilings;
You have two options in my opinion.
1st option: use 4 in ceiling speakers for your front left and front right, and left rear and right rear:
2 sets of these and they are 15 degree angled and you can pivot the tweeter-I have installed these before and they sound great:
2nd option is to only install one set of the ones listed above as your rears and then get an lcr bar for below your tv. It can be mounted to the fireplace or rest on a mantle. I have installed a couple of these and for the price the quality is equivalent to far more expensive ones out there:
As far as hdmi cables go. Don't buy the hype! Monster and most other name brand store bought cables are no better than any mail order or supply house cables on the market, and there is plenty of research to prove this. Just buy the best quality for the length you need. I have used over 50 hdmi cables from monoprice with no issues. I like the 22awg HDMI cables they make and suggest a Ferrite core on each end. Not sure on the length of your run from tv through the attic to closet; but be aware that you will have some issues with hdcp handshake and such over about 40-50' especially with PS3 and xbox 360. I know from experience as I have a similar setup at my house and had to go back and rerun/route a shorted hdmi cable. Another option is hdmi over cat5e. I have installed them as well. Two options:
good subwoofer for the money imho is the polk 10" psw. I have one as well as a $700 similar subwoofer and would say it is pretty nice and comparable for the money:
these subs are cheaper and supposedly pretty good quality for the $
Same thing with speaker wire. Don't buy the Monster hype. This wire is the same quality imo as Libery cables that we used in multi million dollar homes:
Lastly receivers-I would recommend Denon only because I have installed over 100 of them and have owned numerous Onkyo and Denons and can say there are far more problems with video, audio, and power issues with Onkyo; however Denons have been known to have an issue with some zone2 audio going out after a couple years, but typically this is due to heat. I like the Denon AVR 591 and 791 that are currently available at BB or Frys. Another option is to buy a re manufactured one online that is a better model spec wise just re manufactured:
I recommended that one because that is a good fail safe brand; however their our cheaper ones out there. I just personally only like xantech.
Lastly cooling in the closet is the key to keeping your equipment working properly and for a long time. I would make sure you have plenty of air in at the bottom of the closet...ie vents in either the door or through the wall, and then some sort of thermostat controlled exhaust fan system. A simple affordable solution is a bathroom exhaust fan on an ac thermostat
Hopefully that helped some.