Is "live" music sound possible for under $1K

I don't think a $200 tube pre will help your situation. Try for a good passive or just a stepped attenuator from www.percyaudio.com
CBM-170 from Ascend Acoustics are quite good for $328. Maybe a bit analytical and etched so go for a softer amp I would say Creek 4330 but it may not have enough power. These are going cheap used because of the new replacement.

You can attend a lot of live music events for under $1K :-)

I will just add from my brief bout with ownership many years ago that Klipsch KG-4's are NOT what you want - I won't go into details here, but they are not a high-fidelity speaker, and will never give you realistic sound (please do not extrapolate that assessment as extending to any other Klipsch models, especially the classic horns).

Your request should involve some DIY skills to accomplish your mission. You can already cross-out $200-tube-pre idea and visit

http://home.new.rr.com/zaph/audio/

Here is a thought: How about an entry level tubed integrated (JoLida, nOrh, or others?) for less than $580 new paired with a used set of monitors or mini-monitors (e.g., Omega, Triangle Titus, B&W LM1, etc...). You would also need a few bucks for speaker stands and then find some lower-cost wires as suggested above. I have been thinking of adding a system such as this as a second inconspicuous listening post in a formal LR of about the same dimensions you list. I don't know if it will work or not, but that is what I have been researching.