Thanks guys. This has been very helpful. Unfortunately every answer leads to more questions. Some Now I'm looking for some thoughts on how to allocate my budget. Since I realize my personal preferences have a big impact on any advice I'll give you some background.
I'm 48 and my wife is 50. We're building this house to die in but who knows. I've got a BSEE degree and a Masters in Telecom Management but I've gravitated more to the business side of Engineering and am more comfortable discussing foreign currency than Fourier transforms. When I buy things I want them to be high quality but not gold plated.
I am absolutely not an audiophile. My audio card and speakers are always the cheapest part of my computers. I'm more likely to listen to NPR than the radio and even less likely to listen to a CD. For this theater I want to hear the sound from all the directions the movie company intended but I'm unlikely to notice if the pitch is off. I'm considered borderline hard of hearing so I do think some sort of equalizer would be valuable so I can adjust certain frequencies. Since my wife has no hearing problems I'm wondering if there is something where I can preset one arrangement for me and one for her (and probably one for when she comes in a tells me it's too loud).
I am more interested in the video quality. I want to watch movies, TV, football games and play computer games (strategy not first person shooters). I'm thinking of buying a 1080p system so it will support the latest video/computer graphics 3 to 5 years from now but I don't want to waste my money either. When I buy a new computer I generally make sure I have the latest CPU architecture but I usually buy something a couple of steps below the highest processor speed.
I'm not a do-it-yourselfer. I want to do my research up front and tell the builder to build it the way I want. I read the thread on painting the wall for a screen. If I can tell the builder to prep the wall this way and use this paint for $500, buy a screen for $1000, or paint the wall myself for $200 I'm going to tell the builder to paint the wall. If the screen only cost $600 I'm probably going to install the screen so I can avoid potential fights with the builder over the quality of the paint job.
For furniture I'm leading toward 2 rows and seating for 6. The room will be dedicated with no windows. I'm somewhat concerned about soundproofing. It will be a one story house with the bedrooms on the opposite side of the house past the kitchen and great room. I don't want to worry about the neighbors if my 16 year old son turns the volume up too loud. The exterior walls will be brick with 2x6 construction and an R-25 insulation package.
Hopefully that gives somebody an idea of where I'm coming from. Assume I have $8-10,000 to spend for everything in the room including furniture, video, sound, wiring, remote controls, installation, calibration, soundproofing and anything else I haven't thought of. I'd really appreciate any thoughts on how I should expect to allocate that budget.