I think you are both (Mike and Steve) correct.
Between a great system in an average room, and an average system in a great room, I personally would take the great system in an average room.
I think the room is very important, and that a great, treated room can elevate any level of system.
Eh, it depends on the speakers. If the speakers were from the Focal Utopia line then the room is exceptionally important, with dipoles or waveguide/horn speakers the dispersion pattern is far narrower and it makes the room much less important.