There are far more educated tax gurus than me on this forum, but I just spent the weekend working through self-employment tax forms and rules, so...
One way to consider it would be just to list the cost of the entertainment system as "equipment" re business expense and depreciate it, say, over 3 years on Form 4562.
I wouldn't think you could include the space itself as a "home office" type deduction, given that you would't be operating your business out of your living room (or in the IRS' eyes, using the living room exclusively for business purposes). FWIW, I've heard the IRS can be more suspicious of items listed on Form 4562 (things like photography equipment, laptops, electronics etc. that are used for business purposes - technically, you should go to some trouble to show the % you use it for business purposes versus personal use and only deduct the business percentage....).