New house. Media room is 13'8" Long x 15'8" Wide. Wanting a 7.1 setup on a tight budget. Installed blue boxes at all 7 locations and ran 14 guage audio wire before sheetrock/drywall was installed. Now trying to decide what audio/video equipment to buy. I will try to do two layers of seating although it will be difficult considering the dimensions of the room are more squarish than rectangular,.

Plans:
Sub $1,000 HD 720p projector that can create 90 inch screen considering small size of room.
Entry level Onkyo 7.1 A/V receiver (~$300-400)
6, In-wall Dual DC265W 6.5" (~$40/pair)
1, In-wall Yamaha NS-IW760 2-way speaker to be used as center channel (~$80). Not sure about this one. Typical center channel in-walls are too pricey.
Standard $100-$200 subwoofer.

Would this work as an acceptable home theatre? All I will be doing is watching movies and sometimes sports.

I don't think I'd go with a 7.1 system with those dimensions, not enough room for the rear 4. I'd go with a good 5.1 system and put the leftover money towards a better pj.