I won't have a dedicated home theater room, so plan on setting everything up in the living room.

This is my current list of equipment:
46" Sony LCD (KDL-46XBR3)
Yamaha RX-V1500 Receiver
Sony PS3
Nintendo Wii
Direct TV HD DVR Receiver
Home Theater PC

I currently have 2 Polk front towers and a matching center speaker. The rear speakers are Wharfdale bookshelf speakers and the sub is an Infinity sub. I'm contemplating replacing all of the speakers with the Kef HT3000 series.

So, just wanted to give an idea of what equipment i'm working with...

As for the room itself, the main focal point of the living room is a faux fireplace. The wall that has the fireplace is plaster over brick. So, I don't think i can run wires behind the wall. Here's a couple pictures of the living room, but this is how the current owner has it setup.
<img src="http://www.obeo.com/tourimages/39/396109/livingroom_500.jpg">
<img src="http://www.obeo.com/tourimages/39/396109/livingroom1_500.jpg">

So, aesthetically, it seems to make sense to mount my LCD over the fireplace mantel, with my couch on the opposite wall. The main entrance into the room would cause the couch to be slightly off center from the TV/fireplace, though. I'm also unsure if the height of the LCd over the fireplace would be too high for comfortable viewing. Although, the mantel is lower than most fireplace mantels.
Additionally, I'm thinking of putting matching media console units on each side of the fireplace, perhaps something like the Salamander Synergy series.
All of the wiring would be hidden in/behind the cabinets and the power and video cables to the LCD would have to be covered with with some sort of tubing. Ideally, I would have liked to run the cabling behind the wall, but since it's plaster and brick, i don't think that's an option.

If i buy the KEF speaker system, I would probably wall mount the left and right front and rear speakers, have the center mounted below the TV (or on the mantel).

So, here's a few dimensions of that back wall:
Fireplace Mantel - 46.5"Hx60"Wx9.5"D
Left of Mantel to end of the wall is 51"
Right of Mantel to end,which becomes the dining room area, is 56"
The living room dimensions is approximately 12'x15'.

It's obviously not the ideal room for a true home theater setup. But, it is what i've got to work with. I think that what i've come up with is probably the best I can do in the room, but wanted to see what you all thought. I wish the fireplace were a working fireplace, but i don't plan on tearing out the faux fireplace and I don't want to hide it, either.

dedicated HT room. No one I know with a separate dining room uses it more than 3-4 times per year; HT room will get used at least 5 days a week. Easy call.

but, i have a dining table that will go in there.

plus, if i did turn that room into a dedicated HT room, the living room would probably get no use then. ;-)

sit in your couch you have there and stare at that picture over the mantel....your neck will hurt inside 5 minutes.

#2 dont beafraid to use the corner where that TV is now. You can still get decent sound out of a corner loaded room with correct speaker placement.

but, i was thinking (ok, maybe hoping is a better word) that it might not be bad with this mantel, because it really is pretty low.

Ok, so thinking this through, I came up with the following rough numbers:
the mantel is 46" high. leaving some room for the center channel, let's say the bottom of the tv would be about 54" off the ground, which puts the center of the tv about 68" off the ground. The sitting position would be about 11 feet away and let's say the average person's seated eye level is about 42" (3.5 ft).

So, applying basic geometry, the average person would be looking approximately 11 degrees up at the TV from a normal seated position.

I'm not sure how comfortable an 11 degree tilt to the head is, though... not sure if there's a general rule of thumb there.

i am also considering your suggestion of putting it in the same corner, as that isn't a bad idea... I just don't know if the width of my TV will allow it to be positioned in that corner very well. i'll have to measure that as well.

thanks for the suggestions!