For the side surrounds (doesn't look like you can easily do rear surrounds too), skip the in-walls. With your tight funds you might find a decent sounding pair for $1,200 or more... your entire budget.
I'd still try to up the budget a bit, so you have a few better options.
At Ascend Acoustics' website, you could do a 5.0 package of their well reviewed, smaller HTM-200 wall mountable speakers for $722 (shipping included).
Unfortunately, you missed the Newegg sale of this good budget sub by two days: the Klipsch RW-12d, but you could still get it for $350. Or... you could wait for them to drop the price by $70 again and snag it then.
Newegg also has the Pioneer mid-level SC-1222-k 7.2 channel receiver for $549 new (with pre-amp outputs!!). But I highly recommend calling around to area Costco's and finding stock for the SC-1522-k
. It's $599 at closeout. MSRP is $1,600 for a 9.2 channel receiver with added DTS Neo:X decoding. The best bang for your buck and you could use this receiver when you upgrade your speakers for a more sophisticated theater setup.
You have a fairly large room, so you need some decent amp power and speakers that can do a decent job of filling the space in your price range.
Skip the Polk's too.