Setting up a movie room in unfinished basement

I am thinking of setting up a home theater room in basement. It is unfinished - cement floor/wall and the ceiling is not covered. My system is Yamaha RX-V3000 and Klipsch KLF-20, KLF-7 and KSP S6. I will have a projector and screen. The room size is about 15x20x7.
I am seeking your advice for treating the room in very economical way, but still I would like to make it comfortable looking.
I know I should start with budget, but I basically have no clue. I would definitely not spend over $5000 including all expenses.
I would appreciate your input.
If you're going to install dropped ceiling tiles, first put sheets of Roxul between the joists. It's inexpensive, fireproof and a good sound absorber. Roxul made my room quiet, i.e., sound doesn't travel to the first floor. Also, use Roxul behind drywall or paneled walls. Pad and carpet the floors. And that's about all you need to do, except possibly add a few 3PCF or 6PCF rigid fiberglass wall abosrbers. I bought Roxul and Corning 6PCF directly from an insulation supply warehouse. I bought the ceiling tiles from Acoustical Distributors International (ADI).
"Creative" is the word that comes to mind, regarding budgets, on such projects - to make things right, to be certain. If you want to have a system that looks and performs like a quality effort, you will need to put some work into it, plain and simple. Otherwise, stick some speaker all around the room, throw the screen up on the wall, run wires down the wall and around the sides, throw a couch in there - some floor lamps - and that's as good as it will get! Beyond this "ghetto setup", you'll need to do some carpentry. In fact, I suggest it, if you have the time, the inclination, and a budget..which you say you do.
First thing I would consider is doing something with your foundation - namely, your cement walls and floor. Since you only have a 7' ceiling to work with, floor to ceiling space is at the very minimum acceptable dimension. There's really limited options for you there. (I suppose it's an overhead joist wood ceiling above?
What you can and should address are the walls and floor. you really need to build stud/drywall walls inside existing cement walls, and float a wood floor on a pad, over the cement slab floor. This will help things IMMENSELY, for acoustical value and benefits. The ceiling might possibly be able to be built on top of the new walls, with joists carefully snaked in between existing overhead joists - but you'd end up shaving a few inches off the already low low ceiling height you have now.
If you could pull this off, or somehow suspend a ceiling from the above existing, you would gain some noise isolation points, by keeping impact from going directly above. But, again, tough to not lower an already low ceiling, as is. Otherwise, simply drywall the existing, and just live with noise transmission to and from the floor above. Of course, double drywall with Green glue between might help also.
All of the above structural mods, will drastically improve the sound potential inside the space, and also help keep noise from eaily transmitting in and out of it. - huge benefits on all points!
Including relocating electrical and adding insulation and such, and assuming your handy, Home Depot/Lowes, a truck, and around $1500-2000 bucks will get you likely all the materials you could use for this project. And if you wanted further sound issolation from within and without, you could double 1/2" drywall all around, with some Green Glue sandwiched in between, which would add another $1200 to the project, to consider. That's about what what I'd be primarily addressing with construction, anyway.
Your goal is to soften up your walls a little bit, over what solid cement walls will give you for good fundamental acoustical sound inside your theater. Otherwise, the sound will be "to hard, and unyielding" with the cement walls! The cement foundation will, however, help you keep some sound isolation benefits on the other side of the walls you build, yes. So that's good.
If you can manage the above, you will now have a much much better foundation to build the rest of your theater space. Put in a sofit around the ceiling boarder, if you're real ambitious, with some can lights in the sofit (better with hockey puck lights underneath to keep sound from leaking in/out, however), and some fixtures, and you can have a nice dedicated theater space.!
Plenty of ideas all over the net, on DIY rooms. If you don't have any carpentry/handyperson skills, you'll be paying at least 3 to 5 times as much for this project. This is unavoidable.
If you can manage the walls, floor and ceiling, building an acoustical shroud and stage up where the screen will be in front - hiding the speakers, wires, and acoustical treatments behind the shroud - will yield you a very nice looking, high end, theater look, and much better feel than just throwing speakers up in the corners, and popping a screen up! Especially focusing on the front end of the room will take you most of the way their. Paint on the walls/ceiling?...keep it dark on the front wall and ceiling, and darkish tone paint all around the rest of the room, will help the function and feal of the theater -$100 in material, FYI.
You could then build a riser for a back row of 4 seats/theater chairs, and then put 4 more in front of that - all sitting on the floating floor you just built, and the floor and seating will be done.
For acoustical treatments, you can throw some DIY Bass traps in the front and back corners -fronts hidden behind the facade you built up front (along with speakers and wires) - which are easy to find designs if you poke around the forums, as previously mentioned. For reflections, imaging, reverb, and to round out the acoustical quality of your theater, place some absorption panels - which you can make from DIY forums on the net -on the front/side walls, hitting all reflection points between speakers and seats- with lighting sconces in between, and speakers to sides and back of the seating area (one foot and a half off the ceiling, in your case), and you'll have a nice nice looking /performing system, if you look up on the net where and how to place the speakers, in relation to the seating!
Hide all wires behind molding, and in sofits, and fit and finish will look first rate.
The above mentioned will yield you a spectacular looking and performing theater! If you careful, you can make it in your budget.
(Note: If you want to cut some corners here, you can lighten up on the acoustical panels on the front and side walls, since the Klipsch's are a very focused propagating type of transducer - meaning they "beam" the sound towards the listeners, and don't disperse so much to the ceiling/floor or sidewalls! If you absolutely wanted to skip this step, it wouldn't be to bad at all. However, I would add some dispersed throw rugs on the walls intermittently, to help slap echo, at very least - otherwise, stick with fabric covered absorption panels spread around the front half of the room!).
Good luck, hope this helps.
Many thanks to all.
I know $5000 is very tight budget for this kind of work, and if not done right, I may only end up wasting money and time.
Realistically, I would need 3~4 times of money to get it professionally done.
I am not a handyman, but I am willing to spend as much of my time to as I can to save cost even though it will take quite a while.
You need to make a list of what you want in the room. Measure the room and apply some unit prices for labor and material. Drywall, insulation, carpet, paint, doors, trim, electrical wiring, electrical boxes, Lighting etc. If you can do a lot of the work yourself you can save a lot of money. Check Home Depot for prices on the items you need. Some of the work you might have to hire out such as electrical. I would look for a handiman to do the work that you are not capable of doing. Take a little time to do your homework and you might be supprised.

Good Luck.
Agreed just do a room as cheap as possible. If you are doing it yourself you still need a fair amount of money for tools.

Do the room at least it will add value and living space to the house.