One thing I've learned about home theater setups is if you put it in your living room it's not going to be ideal for sound. If it must be in the living room and you must put it in the places you mention, then do it and be happy! You don't have a choice. I'm a perfectionist (and single), that's why I have nothing but a 27" TV in my living room and the kickin' HT system is in the 3rd bedroom.
It sounds like you are sitting about 12ft from the TV? If so, then the fronts should be at least 6ft apart for a 30deg angle, but that doesn't seem practical for you. I'd say that's the biggest problem with the setup, but what are you gonna do?
With 2 surrounds, the best place for them is in the rear corners of the room. You can put them behind you, or to the sides if you want. I wouldn't worry too much about the distance to your ears because your receiver should allow you to boost the volume in the surrounds and maybe even adjust the time delay so they sound even with the fronts.
So, my answers are:
Question 1: Yes, this system is enough to fill your living room, and you will enjoy movies at a loud volume but it's not going to shake the house.
Question 2: You lose left to right imaging across the front when they are only 4ft apart but as long as your receiver allows you to adjust volume and delay for each speaker, the surrounds should be fine.
Question 3: Diagonal to your seating position is best, side mounted or behind the couch is ok too.
Another thing I should mention: I checked out the system at Onkyo's site, and that's great for $499! I paid more than that for my center channel.
