^ it's not actually dependent on the size of the room when choosing how you'll implement your home theater set-up whether it's 5.1 or 7.1. it is dependent on which audio technology you want to enjoy, regardless of your room size. I believe if we talk about the room size, it is the capacity of the AVR to drive what size of speakers that will matter. if you have a big room, then you'll need to have a bigger speaker and an equivalent-powered AVR to handle them.
for the audio technology. my understanding is there are a number of different available encodings on a multi-channel audio. let's talk of movies muna, sa next na yung music.
there are only 2 established companies so far, Dolby & DTS, that provides these audio technologies. and a third one came out very recently: Auro. film makers employs any one or two of these companies' sound format technology when they create and release their films on cinemas and/or digital discs (say for example DVD & BluRay discs) to implement how they intend movie watchers to enjoy the sound on their films.
with multi-channel or surround sound audio, the core encode is 5.1 (thru Dolby Digital or DTS). and then there's the 6.1 which film makers added a rear center effect (thru DTS-ES) and then the 7.1 which added the L/R side surround effects (thru Dolby TrueHD or DTS-HD MA).
so with the Front Height or Rear Height that you want to implement on your home theater:
- the most basic/entry-level AVR that you need to buy is a 5.1ch AVR with a "heights" channel effect. it only mimics or matrixes either your front (presence) or rear (surround) sound effects -- regardless whether you put them on your ceiling or a few feet directly above your front or rear speakers. btw, the rule of thumb for the rear speakers is that is should be placed at your ear level just the same as your fronts -- but due to space limitations, a lot of people places them high above the rear of the listening position. and if you play a 7.1 TrueHD/DTS-HD MA source on this 5.1 system, only the core 5.1 audio is outputted because your system is only 5.1 (although, yes, there's an added 2-channel "heights" speakers but just mimics or say, extends the same sound as the presence or surround)
- the next level AVR is 7.1. this is where Dolby TrueHD or DTS-HD MA encodes will be fully encoded. and film makers implements these to add a side surrounds. it enhances (not extends) the sound experience of the movie watchers like cars or trains that moves in front of you, towards you, then to your side and vanishes to your rear.
- then there comes AVRs designed as 9.1 and 11.1 -- but mind that the full audio encode is only up to 7.1. the additional 2 or 4 channels are just extenders or say, the height speakers.
with ATMOS & DTS:X, though its basic now is a 7.1 audio encode, this new audio technology is designed or intended with a new implementation. it cannot be mistaken with nor be thought of the same "height" channels mentioned previously. here, the intention of the film makers is for movie watchers to feel/hear "sounds from above" and they say they are "object-based" rather than channel-based on the preceding technology. hence with ATMOS & DTS:X, there really should be literally speakers placed above you.
- it starts with 5.1.2 (the core 5.1 + the .2 is the additional heights channels),
- then 5.1.4 (.4 as 2 front and 2 rear heights) or 7.1.2 (2 side surrounds like the 7.1 mentioned previously and the .2 is the additional heights channels)
- then 7.1.4 (7.1 + .4 as 2 front and 2 rear heights) or 9.1.2 (4 side surrounds and the .2 is the additional heights channels
- then 11.1, 13.1 up to as much as 36 (for ATMOS) and unlimited they said (for DTS:X)
while the Auro has a completely different design implementation and rather not the same with ATMOS/DTS:X.
- it starts with 10.1, being the 5.1 core encode, +2 front heights + 2 rear heights (which should be placed directly above your presence and surround) and only 1 ceiling channel placed on the center or directly above the listening position also referred as the VOG (voice of god) channel
this is just my understanding based on my short years of experience, observations, and from readings. I may be corrected and I'm also willing to learn more =))