I don't have a problem watching 16:9 material with black bars on the sides with my 2.35 screen. I find most people it doesn't bother but there are some bothered by it. Some people who it bothers either use masking or a lens to stretch the picture to fill it in. We actually have a number of customers with an anamorphic lens that leave it in place all the time even though 16:9 material is stretched. I guess a lot people did that with 4:3 material when high def first came out. A lens adds a good chunk to the cost but can be found used very reasonably.
As far as speakers. You don't have to go in wall with an AT screen if you don't want. You just have to makes sure the second row can see the speakers and that they are aimed at the listeners. Often that means mounting speakers above the screen angled down because mounting below the screen the speakers are often obscured by the front row. AT screens trade off a little picture quality for much better audio quality by having 3 matching speakers at the correct placement. It also gives correct sight lines.
As far as models go. There are a ton of good speakers out there but here are some features I look for. Ideally, you want identical speakers everywhere but that is rarely practical so try to at least match the series to get that seamless bubble of sound. Mis-matching speakers never gives as good audio immersion. Budget is also a big factor.
In walls - Look for ones in their own box/enclosure or a manufacturer that knows the ideal volume of the cavity for their open back models (you have to call most to find this out). That way you can make a cavity slightly larger and use extra insulation fill to get desired response. So, open back in walls can work and even if you can't get the ideal cavity, they still sound decent.
LCR If you decide to go with free standing speakers just get 3 identical speakers and don't use a dedicated center speaker. Most centers are not great and are a compromise to fit a horizontal space. Good horizontals centers use either a coaxial design or 3 way design with tweeter mounted above a midrange. You don't want a couple woofers flanking each side of a tweeter, especially for your room.
In Ceiling - I'll take a little tradeoff here if you can't get them with in an enclosure. But for Atmos you really need angled in ceiling speakers. You want them to angle 30-45 degrees. The ones that only angle 15 degrees are not angled enough. Dolby spec is to put the speakers ~45 degrees in front/back of listeners. For 2 rows I would probably only go 30 degrees or slightly less to get coverage for both rows. Doing Atmos right in small rooms is tougher because of the typically shorter ceilings than a theater.
Surrounds - For two rows without doing 2 sets of surrounds, one set for each row than get a decent bi-pole speaker placed between the rows. While 2 sets of surrounds are the best way, it not only adds cost for another pair of speakers, but you also need a processor that can handle it. It is easy to blow the budget if you go this route. A bi-pole is a good compromise so everyone gets good surround effects.
Subs - 2 or more. If using 2 one in the front left of the room and one in the right rear (or vice versa) to help with room modes. Subs don't have to match the same brand/series as the speakers.
Brands that meet many of these qualifications. We use Paradigm where I work quite a bit so I'll mention them first. Triad is another one we use with good options for various applications. Focal, Revel, Golden ear, Monoprice, Klipsch, B&W, Elac, Martin Logan, JBL, Totem, Definitive Technology.
