I would suggest NHT absolute wall speakers. PSB sealed sub 10 or 12' (I'm guessing they aren't looking to shake the room , but just clean base). If they like the Pioneer, VSX-1123 is the current model, or step up to the 1223.
Mount on an arm to the back or side of the cabinet - It may be possible to have it right at the cabinet face and swing out (possibly out and up?)when you want to watch. Put a low cabinet rack in the back of the alcove behind the TV.
That is probably as good of speaker deal as you can get. You can get better, but not at that price. You can get cheaper sound card options.
I've been seeing several deals on NewEgg for under $200 for 5.1 H/K receivers - get on their e-mail deals list.
Those were ultra-common about 8 to 10 years ago. Is that hole at the bottom threaded? It looks like you could make an MDF plate that screws against the back 4 holes and you could use a french cleat or put a keyhole in it for hanging.
On the ducts, anything that is open in the theater and bedrooms upstairs? If the ducts go through the theater, wrap them in fiberglass sheet duct insulation, then stuff more fiberglass batting around them filling any air space between them and the theater's walls/ceiling.
Cycling back to an earlier comment on vapor barriers. If the warm air is still damp when it moves through the insulation, then hits a cold vapor barrier, it will condense there - but if it hits the...