Killer Kitchen System under $800 or so?

Keep in mind that in a kitchen you won't always be even close to the "sweet spot". Most of us move around in there. Also, with guests they will most likely never be in the middle.

With that said, I use big in-wall paradigms mounted fairly high up (consider that you will be standing usually) with a really clean amp. If money didn't matter, the speakers would be Thiel Powerpoint or Triad.

I mounted them so the center is at my stove where I'm cooking. This way the people sitting at the breakfast counter won't have one channel totally overwhelming them.

My DAC of choice is always a Musiland. However, if you are going in wall on the speakers, go in wall on the rest of the system too? Or at least hide the gear and have an in-wall IR sensor and volume.

My wife is using a Teac Reference mini all in one (CD, Internet radio, integrated) in her office that costs about $500 . Quite impressive for the price. A cheap used DAC and a pair of speakers and you are ready to go.

The airport or sonos into an HRT Streamer+ asynchronos dac into NHT M00 powered monitors.

anyone used in-ceiling speakers before?

I have some and am replacing them as I renovate. The problem with them is that if you stand under one speaker, you really get too much localized sound from that channel only. The only way to effectively do in-ceiling is either with dual voice coil single speakers or go mono. I just replaced really good niles speakers with a single Martin Logan dual voice coil to eliminate this problem.
The other room with ceiling speakers already is renovated. I intend to get another martin logan and use the other hole for a subwoofer(it's the top floor of my house and the attic should make for one heck of a baffle).