OK. It is *vital* that you follow the instructions in the setup guide (here: http://www.avsforum.com/avs-vb/showt...5#post14456895) TO THE LETTER. This includes NOT putting the mic on the sofa - vibrations transferred to the mic will cause the readings to be way off.
I can't overemphasise the importance of using the right technique for Audyssey measurements. The mic needs to be placed as advised, at ear height, on a mic stand or tripod standing on the floor, pointed vertically up to the ceiling etc. Use all positions allowed by your AVR. Personally, I would still be unhappy at a XO of 120Hz for the ERD-1s and would try to get to the bottom of it. Something is causing Audyssey to measure the -3dB much higher than it should be in reality. My own ERD-1s are positioned fairly normally in the room and the XO measured by Audyssey is 70Hz.
Are your ERD-1s wall mounted, I can't recall asking you that?
What height are they mounted at?
In what position, regarding angle from MLP to speaker (eg 90 degrees or 100 degrees) or if they are rear surrounds, where are they on the wall and are they set to BIPOLE in that case?
Can you post a rough sketch of your mic placement positions for your Audyssey calibration and also your room dimensions and seating positions etc, including the MLP? This might show up any issues in that regard.
Did you confirm by listening that all the drivers in your speakers are working properly?
And that the switches are set correctly to Right Dipole and Left Dipole - ie differently for each speaker?
Have you tested an Audyssey calibration running the ERD-1s in bipole mode, just to eliminate any potential issues with nulls affecting the readings?
A lot of questions I know, but if anyone is going to be able to help you with this problem, they will need all that sort of information in order to make an informed guess about what might be causing the problem.