In my opinion the 10.7 is suited to bigger rooms. The 10.5 might be a better "musical" choice going by what I have heard in showrooms. I have owned the 9.5 for some time now and its a very good place to start your audio journey. There are however some good options upstream from the Diamonds if you have the budget especially if you are willing to hear some other brands - PSB, ProAC, Paradigm, EPOS etc. to name a few. The difference is how much better they "resolve" music which brings up the electronics.
I would like to steer you away from the AVR category of setups. Go for a "Stereo" receiver in the HIFI section on the Denon website if you are keen on Denon. A pure 2 channel stereo receiver will trounce an AVR (Audio Video Receiver) which has a bunch of circuitry for video which adds noise to your sound signal. Most 2 channel stereos will have a sub woofer output so you will have the 2.1 aspect covered.
Just remember this - audio is a journey. Don't try to do it all in one go.
Your ears and tastes evolve and change as you get along this journey.
Don't go by how much you spend especially at this point. Most entry level audio is highly marked up and you really get only 30% in terms of what you pay for. Take a serious look at the used market and you will be way ahead of the curve. A Rs 1 lakh budget will get you a seriously good system if you look properly with patience.
Stay on here and you will be in safe hands.