I was able to get the recessed lighting installed today. It took time, but went in without any trouble. Here is a picture of how I mounted them...
These are 5 inch Utilitech can lights. I bought them at Lowes for about $10 each, including the trim. This cost me about half as much as the halo 5" lights we put in the kitchen. I figured since these were cheaper that they may be a bit harder to install, but that was not the case. They didn't come with metal mounting bars, so I attached them to wood cross members. I left a about 3/4" space between the can and the wood for heat purposes. The rest of the can has a lot of air space around it, since these are not IC rated.
The pictures above and below show the lights along the soffits. The lights on either side of the beam are on different switches. This will allow us to dim the lights more at the front of the room near the screen.
What are all those holes in the wall? Access spots to run the coax cable to the receiver. I did this to keep it away from the 120V power lines and reduce the chance of noise. The sheetrock job on the wall as pretty poor anyway (lot of seams showing), so I needed to patch and skim the wall.