Can't do in-ceiling rears and in-ceiling Atmos. All your bed speakers (the "5" in 5.1.4) need to be placed at half of wall height or lower, so there is separation from the Atmos speakers which are on the ceiling.
See the Dolby info for a layout:
If you can't find a way to get the surround speakers off the ceiling, one option might be to use pendant speakers for your surrounds. Check out Gallo Acoustics for good options if this appeals to you and passes WAF. If not, then look at the KEF T101 speakers .. nearly invisible they are so thin.
Also, your sub is going to be sub-optimal (!) in the open space of a loft. You will get the most benefit by placing it very near your seat, as a side table, or directly behind the couch. I suspect you will get a lot of complaints as the sub reverberates throughout the house, via that entranceway (lots of tile/stone/glass/wood, right?). So, it will behoove you to keep the volume down and the placement close. You might even consider adding transducers, to give you more of the physical portion of the experience that you will miss in the new configuration.
As to splurging, will you be listening to music in the stereo configuration (i.e. listening to the L&R speakers only in pure direct mode, sans sub)? If so, then getting tower speakers makes sense to keep some semblance of bass response. If, however, a sub will stay in the mix for your stereo listening, then it might make more sense to stick to higher quality bookshelf speakers.
As to which speakers to choose, there are literally hundreds of choices and we can't decide for you. The best approach is for you to devote a few weekends doing the rounds of various speaker purveyors in your area. Bring along a variety of well-known music and begin listening to lots of speakers. Take a few notes and report back your findings. Once you have a feel for your likes and dislikes in a sound signature, we can help steer you to quality options that meet your criteria.
Pictures or a diagram of the space would be helpful in visualizing the best approach to your new system.