5.1 or 7.1 for 14' x 17' room ?

The Lexicon processors provide their own 7 channel algorithm that can and does work with any format. I believe you can achieve good results with a placement that includes far left, left, center, right, and far right along the front wall and bipolar surround at listening position along side walls. This works well if your front wall is the long dimension of the room. If your front wall is the shorter dimension, you can pull the far left and far right about a third of the way to your listening position along the side walls. In every comparison I've done, I prefer the Lexicon algorithm (parameter 'side speakers on') to not usining it. (YMMV)

Your room physically is almost exactly as mine is and I use a 5.1 set up that more than fills the room. In addition I have french doors and no window treatments. The problem I'm dealing with is the room itself. I have found that the hardwood floors make the room very bright compared to the wall-to-wall carpet I had. I added a 9x12 area rug which helped to reduce the echos but I still need to do more. I started to look at hanging tapestries and now my wife thinks it's great that I'm into "decorating". Can anybody recommend any THX-certified tapestries?

My HT listening area is about 13' x 17', and I noticed a subtle but worthwhile improvement when I added two rear speakers to expand from a 5.1 to a 7.1 channel system. The sound is more enveloping both with music and movie soundtracks.

I use a Lexicon DC-1 prepro, and independent of the source material the Lex can generate 7.1 channel sound. If I had not had Lexicon's Logic 7 to generate 7.1 channels, I would not have added the two extra speakers and power amp as I agree that 7.1 channel source material is questionable.

Some of the newer prepros have THX Ultra2 and ASA which I believe can generate 7.1 channels from 5.1 channels, but do not know how that compares to Logic 7.

My speakers are an all M&K sub/satellite system. Originally I had two tri-poles on the sides of the room about 2/3 of the way back from the front wall when I ran in 5.1. For 7.1, I added two direct radiating satellites at the rear of the room and configured the DC-1 accordingly. Yes, its more money, but for me it was worth it.