the room is 1,2000 sqft. I am new to surround sound but i assume that 5.1 surround sound might not be a match for 30x40 ft.. I would like to keep the price under $700 but i am having trouble choosing between all of the speakers available. I also need some way of hooking my iphone up to the speaker preferably through AUX as I will be getting a new iphone when the iphone 5 comes out and they are changing the dock. i will not be placing the rear speakers at the back of the room, rather, just behind the point where the couch will be. thanks
For movies I tend to recommend a strong subwoofer and then small speakers for the surround effects.
For music I tend to recommend less emphasis/budget on the subwoofer and more emphasis towards getting front and surround floor standers.
So if you want emphasize on movies mainly, then buy 1 or 2 for (5.2) subwoofers for surround sound and get small speakers for fronts and surrounds. There is absolutely no point in floor standers for movies. Movies and Pre-Amps all send the bass signals to the subwoofer determined by software-based crossovers so floor standers wouldn't be much of a benefit (and they are usually more expensive).
If music is still important for you then I would get floor standers for my fronts. You REALLY want to get a full range stereo effect for the best music experience.