speaker recommendations for a 12 x 12 room?

I have a room slightly smaller than yours, and have run through many speakers, and I can confirm that the big challenge is (in Duke's words) "large peaks and dips in the bass region due to speaker/room interaction." In the end, I found that sealed-box speakers work better than ported speakers. Ports, whether on the front or back of the speaker (but especially on the back), tend to excite bass resonances that muddy the sound. Your budget is in a realm that I haven't explored (kids in college, you know), but one speaker I've owned that you might consider is the Harbeth HL-P3ES-2. It's a small sealed box monitor. I used the Harbeths with a REL sub, dialed way down so as not to overwhelm the small room, but still adding a nice sense of weight and ambiance.

Merlin TSM's may be an option. Since they are sealed they may be a easier to integrate into your room than a ported design. If you can get the backs of the speakers 18" off the back wall and 2' off the side walls AND if you can put your seating position at least 9' back, they should work.

I tried Duke's suggestion this morning . . .

I have a spare bedroom with about those dimensions (actually 12x13x8) that I had set up a spare system in, just as an afterthought when my son moved out. Components are all spares not even close to your budget - I'm using a TAD60 amp, Von Schweikert VR3 speakers and a Marantz cd changer. I had it set up square originally and found it ok, but unremarkable. Moving the speakers out into the room didn't materially improve performance.

After rearranging per Duke's advice there's a huge improvement in imaging and bass performance. Thanks Duke! I have the speakers set up at about a 20% angle and they're pretty well hugging the walls right now, though I will be playing some with placement in the next day or 2.

The results now are good enough to entice me to put my spare turntable back up there and do some more tweaks - particularly on furnishing. I may even invest on some equipment upgrades.

Thanks for the thread, and thanks again Duke!

Totem might be a good option for your room. I have a pair of Model 1s in my 11-wide room and, with some room treatment, have wonderful sound and deep, deep imaging. I have mine mated with a Totem sub and a Creek amp.

I've dedided that a monitor-type speaker (on stands) sounds much better than a floorstander in my narrow and wide room.

You should check out Robert Harley's review of the Sunfire CRM-2 ribbon speakers with SubRosa subwoofer in Issue 183 (August 2008) of the The Absolue Sound. The ribbons are small and not as sensitive to boundry effects as a regular cone driver speaker. This would solve some of the problem and the subwoofer would allow placement of it in the best sounding location possibly solving the rest of the problem. If you can believe what Robert says this is one nice sounding system. I can't confirm it though since I haven't had a chance to search out a dealer with these.