This is my Home Theater. We built it in the summer of 2003. I did make some mistakes in buy components for it at first, but eventually corrected those mistakes. The two parts of the system that I would like to upgrade right now are the reciver and the sub. As for sources, we use the cable box, the xbox and the dvd player. As for music, its played off my ipod.
That is a beautiful room you have there! Those back speakers are in danger with wires and placed by table, I am sure yo move them around, but still looks like an accident just looking to happen. As far as replacing the Rotel you should move into seperates...the improovement will blow you away. Lastly on your sub question, Place the sub in the place you sit, move around room, where it sounds best.....the sub goes there.
Try lpacing the sub between your mains and the tv. Keep it at the same distance as your main speakers (fronts). This worked well for me and reduced the boominess.
I was wondering if you all could give me some tips on subwoofer placement in my room. Now it is where it is because putting it a corner created too much boom. Thanks
System edited: I found out that i had some marble slabs lying around so I decided to make a mass loader for my sub. It works pretty well and the bass sounds a whole lot tighter.