Home Theater Noob Looking to Upgrade

I have been reading about Home Theater systems, components, upgrading, etc. for days. I had yet to find a good place to really get some good information without it going over my head. I am finally getting pretty well versed in some of the lingo but please bear with me. I want to really up the quality of my home theater, but staying within a reasonable budget.

Background:

As a youngster I wanted a surround sound system so I went out and paid like $300-500 (can't remember) on a all in one 5.1 Panasonic system. Somewhere along the line the electronics of the system failed so I tossed out the subwoofer which powered the system somehow and the receiver where you inserted your dvd's. I kept the center channel, front left and right and rear left and right (all the same speaker).

Recently, back in August or so, I went to my local Best Buy (probably frowned upon but oh well) and picked up a new Samsung LED-LCD-HDTV. I also in the same purchase picked up a new Yamaha RX-V373 and a Polk Audio PSW110 sub-woofer. I am currently using the satellite speakers from the out of the box system. As you can imagine this is less than satisfactory. It has sufficed for the past few months but it is time to upgrade. I have the system set up in a full basement, not sure the square footage or anything, but decent sized.

As I understand it, my current receiver can power 85 watts per channel into 8 ohms (1 kHz) at 0.9% THD (not all that sure what THD is although I have read a little bit about it). I am ready to upgrade the crappy speakers to match up more with my sub's quality. I have a feeling to get some really nice speakers would be a waste with the receiver only pushing 85 watts per channel. I am assuming I am going to need to buy another amp or something to help drive enough power to each speaker, but I am just not figuring out the best and most reasonable way to go about this. I was thinking I should get a new center channel first....Any suggestions?