So a few things here...
First, the primary surrounds in a 5.1 layout ARE the side surrounds. It's common for people to do what you have and place the surrounds behind you, but really you should only have back surrounds if you first have side surrounds (expanding from 5.1 to 7.1). So, yes, you are definitely missing something by not having side surrounds, as there's a huge gap between screen effects and surround effects currently.
That said, you should NOT use in-ceiling surrounds with an Atmos setup. Atmos requires separation between the "ear level" layer and the "overhead" layer. If you then lower the rear speakers further it will be even worse -- sounds panning around you will start at the screen, jump up to the ceiling, then jump down behind you. So only add side surrounds if you can place them properly to the sides at the same height as the back surrounds.
The AV8805 is a processor, it doesn't have any amps so you don't have to worry about "using up" channels like a receiver. It is capable of connecting a full 15.2 speakers setup in Main Zone and ALSO running 2 pairs of stereo speakers for Zone 2 + Zone 3 via the dedicated pre-out.
Thanks! I was afraid that was the case. Another option for the 7.1.4 could be to place speakers directly at ear level on the giant piece of furniture I have directly behind the MLP. However, this would meant that they would 1) be literally right next to us 2) be behind us instead of beside us