If the room is the thing, how do I fix this?

Watch these videos dealing with small rooms.

http://www.realtraps.com/videos.htm

Dave

I own two pairs of Shakti Hallographs in a big room. They are the biggest bang for my buck to date! I first heard these in the small hotel rooms at CES 2005 and 2006 and the rooms just seemed to disappear.
Good luck!

Paul

Square-ish rooms suck. Avoid the cube if you can. Try diagonal speaker placement if you have to live w/that room.
You have a better shot at balancing absorption & diffusion with your living room & furnishings, and a couple of treatments than being able to overcome square dimensions. Cheers,
Spencer

If you go for nearfield listening, which is best in a small room, room reflections aren't as big a problem. I sit approximately seven feet from my speakers and that's been my experience.
Was in a similar situation a couple of years ago and went with the smaller room as it was all mine and the wife couldn't care less what went into it so experimentation was the rule. A well-balanced small system can provide a very satisfying listening experience in a small room.
Take this with a grain of salt though as I'm not a critical listener by Agon standards. I can however listen for hours without getting bored or distracted by the system. Good luck.