First, I find it interesting that you capitalized "theatre" in your preface to the question. That's exactly how most people see it - Theatre is the big Broadway musical, the well-known play, the money-maker. The rough, raw art that comes from smaller companies is theatre. There's a hierarchy to the system of theatre - of all art - that ultimately comes down to money. You're a viable artist if you make money, a struggling one if you don't. What's interesting about the posts Michael and Adam have been writing is that those questions too come down to money. Why is that? Because artists, particularly upstarts, are always looking to stay ahead of the financial tsunami that is threatening to come down on them. Whether you are an actor looking for the next paying role, a technician trying to find a job in the field, or a small theatre company looking for funds, money is always a factor.
But I digress. I could bitch about money all day - except that's not the question.
Rather than ask how to get the audience to think outside the proscenium box, a more important question must be answered: what is the role of the audience? Now, this is not a new question; Artaud asked it (first? I'm not sure), and Grotowski executed it. When creating theatre, I find this question to be of utmost importance - if it's not the first question you address... well, then I have nothing else to say to you. Kidding! But seriously, it should at the forefront of your mind as a theatre creator.
Through this question, the idea of staging can often be answered. If you're doing a piece on, say, group therapy, then perhaps you want to put the audience in the round, as if they are a part of the therapy session. Or maybe you want to keep a wall between the piece and the audience - giving the idea that the audience plays the role of observers (giving the idea of psychiatrists watching through a two-way mirror).
The point is not WHERE you place the audience; the point is HOW you want the audience to participate in the show. By "participate," I don't mean that you have to do some hardcore audience participation business with each show. I just mean that you should find the best way to keep your audience engaged and interested in the show.
Nowadays, when you look at big money-makers in the theatre, they are engaging their audience. How? By rehashing popular plays and producing over-the-top musicals (which most often rehash popular music). And then there are the other, less flashy, yet still successful productions - think of August: Osage County, Passing Strange, etc. - that are also engaging the audience. While some of that success can be attributed to critical raves and theatre awards, I believe - nay, hope - that they are also looking at the question I posed above.
What keeps theatre alive and viable in this ever-evolving technological age is it relation to the audience. People come to the theatre to EXPERIENCE what's happening mere feet away from them. So do a proscenium show, or do a thrust show (you know, 3/4 stage... not a porn show - unless you really want to do a porn show, in which case that's between you and your city's ordinances)... just make sure you know WHY people need to come and see it. If you can't answer that question, you have a bigger problem than how to stage your production.
There's a joke some friends and I made up a while ago: "If people put on a play in the woods, and no one's there to see it, did they really put on a play?" Obviously, it's a stupid joke, and I'm embarrassed to admit I took part in it - but the point's there. Movies will still play if no one's in the theater. Music will still blare over speakers even in there's no one in the room to hear. But if you don't have an audience for your show, would you still perform? Always remember that your audience is most important, and no matter how avant-garde your piece may be, your audience will (hopefully) still be there with you at the end if you've kept them in mind every step of the way.