I think you should listen to some Country and Western, you may like it.
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I think your room is too square and too small to use a subwoofer. I ran a pair of Compact 7's in an 11 X 11 room for a while (not by choice) and there was barely enough space for them. Yours at 12 X 14 should be fine, but borderline. I would sell the sub and dump the money back into upgrades elsewhere or buy some music. The Compact 7 will be an "upgrade" over just about any other speaker I can name so, yes, I would replace the Katan's. You may also want to consider a pair of Monitor 30's for a room that size, which have a smaller box and slightly less bass output.