Welcome!
After loudspeakers the room is the most important component. The room should be of decent size and shape as well as being insulated. My basement room is 8ft x 13ft x 21ft (Fibonacci ratios to minimize echo), size limited by the ratios and available ceiling height, and is well insulated (don't forget the door and ductwork). Hard to fix a "bad" room. My mistake was installing recessed can light fixtures (that transmit sound to the spaces above).
Setup is also critical. Loudspeakers should be symmetrical to the listener, away from walls. The listening position should also be away from walls, the best is 6-10 feet away. Don't be afraid to experiment. I prefer tweeters to be at ear height, thus monitors are ideal. Floyd Toole, respected audiologist, recommends use of 4 subwoofers in the corners or midpoint of walls to tame inherent bass peaks/dips which can easily be 20-30 dB.
Diffusion is limited to higher frequencies, roughly 1100 Hz and higher due to those pesky laws of physics. The key to absorption is the material. Shop strictly by the numbers, not appearance or intuition. Avoid egg crates or foam. Owens Corning 703, high density fiberglass is the best, Roxul is OK. I have ten GIK (find them here at Audio Circle) 244 panels which are of little benefit in my nicely shaped room but do wonders in other spaces.
