Home Audio System - Where do I start?!

Hi -
I've never owned a home audio system in my life - I stick to the hardware/software side of computers, but when it comes to audio systems I'm clueless. My wife wants to get a home audio system for christmas (I almost had a heart attack), but my research skills on this topic are null.

I would like a complete package, not piece meal components. I would like the speakers to be wireless as I don't want to have to run cables. All I have is an LG 42" LCD HDTV.

So I have some questions that I hope I can get some answers to and get me headed in the right direction...

1 - 5.1 or 7.1 surround?

2 - Any brands to stay away from; I've heard not so good things about Polk.

3 - What brands should I look at?

4 - What should I look for in an audio system; how many speakers, input/output? I don't want sub-par quality, but between middle of the road and high-end preferably.

5 - How good are floor stand speakers vs traditional speaker box?

6 - How do I convince my wife to get an Xbox 360 as well?  


Thanks guys!