Right. If you're TV is set-up on one wall, and your chair/setee is up against the opposite wall, 7.1 may be tricky. For 7.1 you really need a bit of space behind your listening position.
Now. If you have your chair/setee farther forward from the rear wall, this will help with your desire for 7.1, but will probably mean your choice of a 50" TV will be too big. Personally, I'd go for a 40"/42" TV and have your listening position about 3/4 ft forward of the rear wall. (Assuming you're using the length of the room and not the width) This'll mean you'll be about 8' from the TV and will give you just enough space behind to incoroporate the surround rear channels.
Conversely, stick with the 50" and scrap plans for 7.1, just stick with 5.1. If you sit too close to an LCD, you start noticing blockiness. I'd rather have a slightly smaller, but much more detailed/smoother image than risk a bigger TV from too close a viewing position.
Good choice of receiver BTW, (I can vouch for it). Any reason you're not interested in a Plasma? LCDs are typically brighter, and some would say more suited to TV type duties in a lounge. But in a dedicated home cinema room, with blackout curtains and such, you may find a plasma a better bet. Try demoing some if you can. The new Pioneer 428/508 range are meant to be out-of-this-world.