Given your budget for your entire solution, IMHO I would break down your expense allocation as follows:
Blu-ray player $100 - $150
Powered sub woofer $200 - $300
Total Speakers $1,150 ($300 x 3 and $150 for 2 surrounds)
Front stage L-C-R $300ea - $350 ea
Surrounds (2 to 4) 2 @ $150 or 4 @ $300
Regarding in-wall/in-ceiling speaker brands in this price point, check out Speakercraft, Klipsch and Polk to name a few. I'm not sure you will be happy with them over the long-term given the size of your room, but you work with what you have. You can always upgrade later with bigger speakers.
Try researching the Speakercraft Aim series or Klipsch since many of them have movable tweeters or horns (Klipsch). Unfortunately, you will be hard pressed to find a speaker that is enclosed at this price point.
As a sample of picks (Speakercraft) - for the 3 mains Aim LCR 1 and 3 in-wall speaker (sold individually) and for the surround in-ceiling speakers look at Aim7 (sold in pairs)
I should also recommend that you also take a look at the definitive technology in-walls (RLS III), as you can get some pretty good deals on eBay and they are enclosed. Might stretch your budget even further though.
Hope this helps
My set up
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