Have $500 for digital upgrade - how should I spend

I have assembled a modest family room system that is geared to social rather than critical listening. I'm less concerned about precise imaging & detail but more into just being able to convey a sense of musicality at various listening positions throughout the room. In terms of musical taste, I very much enjoy blues and jazz. I have $500 left for a digital upgrade to my system which is currently comprised of the following components: Mirage OMD-28 loudspeakers; Wyred SX 500 mono amps; Space Tech QA-001 mk2 6SN7 preamp; Squeezebox classic (no mods); Proceed PDP2 DAC (circa 1991 - Burr Brown PCM-58 chip). Do I upgrade my DAC to Valab, MHDT, etc or the power supply on my squeezebox, or both? Should I update my old no name digital cable?
Upgrading dac to mhdt (tube or SS) is a good option.
Is there anything that you particularly want to change about the way your system sounds?

Why not put the $500 in a drawer and wait until you get some additional cash and go for a more significant upgrade?
Mceljo, I am normally of the mindset to do as you suggest for my main listening setup. But this is a case I am trying to build the best family room system to share with family and friends for a budget of $5000 and don't want to spend much more than that. I have $500 left for a digital upgrade. I am wondering if I spend this $500 on a Valab (or Musical Fidelity) Dac ($200); Black Cat Veloce digital cable ($130) and the rest on upgrading my squeezebox power supply would that be better than say purchasing a PS Audio Digital Link III Dac for the full $500. Or I could go the route of MHDT dac with Black Cat Veloce digital cable and not upgrade power supply on SB. I also have no idea how my existing DAC which was pretty good in the early 1990's stacks up to budget offerings of today.
I don't have any experience with your equipment so I can't make any recommendations. It almost seems that you're planning to spend a set amount of money rather you need to or not. If you can describe what you think your system is lacking then other on this forum might be able to make a recommendation. There may be some $500 gems out there they could be a significant improvement over some of your equipment, but if you have decent stuff then you're probably dealing with different more than better.

I hope you find just the perfect thing to finish off your project.
may be a dumb idea for you but you mentioned sharing with family and friends. I note your only source listed is the squeeze box. how about a PS3 player and a small monitor. get disc player if friends bring stuff over, internet streaming music or such, some games, other stuff. not audiophile but may add to usability for friends especially if the family means some kids. just a inexpensive thought.