Help me down grade

For wall/shelf mounting a pair of used Linn Kan II's (in good condition figure $400, or so) will sound good.

A used Linn Classik (all-in-one amp/CD + a tuner depending on the model) will mate well with the Kan's and the set should run less than $1500.

Unlike most speakers the Kan's do not suck when placed on the wall (they were designed for close to the wall placement).

You might also look into the small round Gallo speaker systems (two small/round speakers + their small powered sub).

Less expensive, but similar to the Gallo's, are Orb speakers (small round speakers + a small matching powered sub).

I'm familiar with tha Kan's and the early Gallo systems and would be fine with either.

Never listened to the Orb's.

What we use for casual listening (not listed with my system) is a Sharp SD-EX111 (all-in-one CD/tuner/amp) mated -w- small Polk RT15i speakers (placed on a bookshelf in the living room).

In that the speakers came from a local thrift ($15) and the Sharp was purchased @ closeout ($75 including shipping) this combo cost less the $100.

The Sharp retailed for $500 and the Polk's @ around $150.

If you are not in a hurry consider putting something inexpensive together like our Sharp/Polk combo.

Get a used Linn Classik k CD AM FM plus extras in one unit. Hook up a used pair of Linn Katan speakers and you should be good to go.

Dekay,
Where have you been? I haven't seen you post on here in years! Good to see you back!

If you want to save lots of shelf space, get an iPod, a Wadia iTransport, and a Peachtree integrated amp with built-in DAC. Their DACS sound great. Load the iPod with ALC files and you'll have a rig that sounds better than all but the most expensive CD players out there (I'd still NEVER give up vinyl, though).

For speakers, right now Audio Advisor has Energy Veritas 2.2i stand-mounted speakers for $899, and the matching Veritas stands for $169 (down from $450). That'd be a great way to retain the sonic signature from your old system. And you could always add a compact sub to fill out the last 1/2 octave compared to your dearly departed Veritas 2.3s.

If that won't work for you space wise, get a pair of Mirage Omnisat 3 FS speakers and a small sub (their MM6 is a 9" cube). The FS model has a miniscule footprint, is wonderfully efficient (93 dB, which would work great with a 50 wpc Peachtree amp).

If you must go with wall mount (and at that point I think you're conceding TOO MUCH), get the Mirage OMD-5 or OS3 Sat.

As for your bright room, you could easily tame that with a throw rug, drapes, and wall hangings. You should do that anyway; it's much easier to tune the room.

I had small system like what you're looking for now a few years ago. Wonderful sound, beautiful to look at, and within your budget if bought used.
Quad 11L speakers, Antique Sound Labs integrated tube amp, and a cd player such as an NAD, Cambridge Soundworks, or Sony CD/SACD player would do the trick.