is a center channel really necessary??

For a 2.1 system, couldn't I choose a BlueRay player that downmixes into 2 channel rather than doing it in an AVR?? I believe the Oppo BDP-93 SE does this.

I have a 7.1 setup with 2 x Aerial 20Ts for left/right and Aeiral CC5 for center channel. For movies I definately prefer to use my center channel. It is very good, blends perfectly with my mains and makes dialogue more realistic.

Personally, I've become less and less interested in 5.1, which (esp. for music) inevitably sounds processed and unnatural to me. i still have a surround setup in my living room, but find i do almost all my movie watching/music listening on a secondary 2ch system. perhaps if i watched alot of action movie i'd crave the sensation of explosions behind me, but i've never felt i'm missing dialogue or anything essential.
ergo, i vote with the folk who recommend getting the best two channel setup you can afford now (full range speakers and 2ch integrated); conceivably you can add more gear in the future if you feel you need it, but at the very least you'll have a great base to build upon.

Stage 1 option - HT bypass integrated. Do these work??

One option I was thinking of was to wire the walls for surrounds and leave them unused for now and go with something like a Peachtree Nova (I am a Sonos user) with a pair of speakers from a big mfg (like Paradigm/B&W) so that it would be easy to find a matching center down the road if needed.

So Stage II, if needed later, would be add:
1. AVR
2. 2 in-ceiling surrounds
3. matching center

I've always wondered how well home theater bypass works as you are using the amp of the integrated with a very different amp in the AVR.

The advantage of this approach also is that I could just get a cheaper AVR as it's only going to drive the center and surrounds.

PS I actually demo'd the Peachtree Nova and a set of Paradigm STudio 10s w/out sub and was pretty impressed. Nothing mind blowing, but for a package just over $2K it was awesome.

In general I would say yes, unless you plan on sitting exactly centered between the front speakers. The center channel helps a lot with centering the dialog onto the screen if you are sitting off to the side.

Now having said that it has been my experience that the center speaker always sounds a little different from the mains and going with only two front speakers results in a more seamless sound when the sound pans across the screen. That is with inexpensive equipment - high $ stuff may be better.

Mark