Small Speakers For A Large Room...

Sonus Faber Cremona Auditor M. Not only are they fairly sensitive (88 dB) for a stand-mount and incredibly cohesive, they are also drop dead gorgeous, and might get your wife interested in home audio.

TAS review

What HiFi review

Home Theater Review review

Tech Radar review

The reason many small speakers have limited dynamic range is because they try to squeeze bass extension out of the small cabinet by padding down the sensitivity of the midrange and above. The Cremona Auditor M, however, doesn't try to go there; the fact that you're willing to use a sub (or two) works in your favor. By not trying to get that last half octave of extension, the Cremona Auditor M has a sensitivity of 88 dB and can handle up to 250 watts. These translate into room-filling dynamic range. And they'll sound large when supplemented with a good sub.

They're enough under your budget that you could afford a good sub (or two) to go with them. Think about a JL Fathom F110.

"If you know of small-ish speakers that sound large, I'd appreciate some suggestions!
Srosenberg"

Joseph Audio Pulsars...

I will second the recommendation for the KEF LS50, and assuming that you can mate them to the right amp they sound wonderful.

Another couple of speaker lines you might consider looking and listening to are the JM Reynaud and Triangle stand mount models, both from France. I am especially fond of the JMR line. Their Offrande models are magnificent speakers for a larger room, but they probably won't pass the WAF test. The smaller Bliss is a great smallish 4 Ohm speaker, especially if used with the JMR "Magic Stands".

Perhaps you could also look into Silverline and System Audio.