Recommendations for upgrade from 5.1 to 7.1

Being still in the state of upgrade frenzy (I am finishing up improving my main stereo rig - see other thread I started about a month ago), I like to hear your suggestions for system changes and/or improvement for my den based HT system.

Please note:
Planned changes are marked between [[brackets]].
The mix of components are to blame because of regular upgrades in my other music systems, relegating older or less suitable components to the HT system.

Video: Sony PS3 for blue ray movies and DVDs, HTPC. [[Oppo BDP 103 after uprading my current Samsung 55" LED HDTV to a 3D model]]
Music: HTPC/Logitech SB Touch [[after market power supply upgrade]], Sonic Frontiers SFT-1 as transport, Benchmark DAC1 [[Eastern Electric MiniMax Plus DAC with DEXA opamps upgrade]].

Krell Home Theater Standard [[7.1 processor but which one?]]
Krell KAV250a/3 + KAV250a [[selling them and get a better value/money 5 ch amp?]]

Fronts: Duntech PCL400 (Black Knights) with Cardas binding posts (used to have Snell B Minor as fronts)
Center: 2x Snell ICS1000
[[Snell AMC800 in wall planned for 7.1]]
Surrounds: Snell AMC900 in wall
Sub: 2x Snell PS10 [[Velodyne DD-10 or one Linn Sizmik on ASC bass base]]

Power Conditioning:
Shunyata Hydra 4

IC: Cardas Golden Reference for L/R/C, Transparent Music Link for SR/SL
NordOst Silver Shadow for digital
Sonic Wave glass optical cable from the PS3 to Krell HTS [[any need to upgrade this cable?]]
SC: Audience AU24e for the fronts and center, Belden in wall for the rest
PC: Shunyata Python from Pconditioner to wall, the rest on a mix of Cardas Quadlink and Shunyata Venom3

Isolation: Black Diamond Racing cones/pucks under most devices [[will try Aurio, Symposium]], hockey pucks under the front speakers and subs.

Room treatment: 6" thick 48"x 24" Bass Traps on the side and back walls, thick curtain behind the system and front speakers on the long wall (best placement for the Duntechs) for a 9' x 12' basement room with hard wood floor on concrete and a relatively low ceiling of 7'. Two 8'x 5' carpets to reduce the echo. [[corner bass traps, maybe an acoustic panel on the ceiling right above the listening couch]]

What is my weakest link?

Of course YMMV but appreciate any suggestion to improve this system and/or improve the synergy between components in general and for a 7.1 processor specifically, thanks!
I think smaller speakers will work better in your room, and 5.1 should be good enough.
Indeed these Duntechs look huge and dominating in that room but as they sound awesome, very detailed with great imaging, wide and deep sound stage and above all, brings out the emotions, it is very hard to part with them. I could contemplate switching them with the a bit slimmer looking Dunlavy SC-IV in my main stereo rig once I have replaced the grills and possibly the stand with custom marble ones so that they look a bit more modern. In the future, they may be replaced if I decide to go for an all in wall speaker system for the HT room.
Very little market of movies are released into 7.1 for home theater, but they do keep pushing the selling of devices to honor the few that are released. Most everything (95%+) is still 5.1 only...I have used my other channels for bi-amping the front speakers if the AVR processor allows or I have used the additional speaker outputs for a different zone like the kitchen or outdoors for entertainment in those areas of the house.
To Shakedown's point, while that's true, newer titles are taking advantage of 7.1 and having a 7.1 setup in a larger room makes a significant difference over a 5.1 setup. Using additional surround modes in the major processors will allow you to use 7.1 from a 5.1 encoded environment.

In terms of processors, consider Emotiva, Marantz, Integra, NAD, and Anthem (listed in ascending price). If you want to go more than 9k for a processor, then look to audition a Classe, Theta, or SimAudio Moon. Some of the more expensive brands have not kept up well with the flurry of HDMI changes, FYI. I personally prefer the upgradability of the Anthem models and the NAD designs. At least you know that you have a stable platform for 5-10 years. My disclaimer is that I've been an Anthem pre-pro owner for years and very, very satisfied.
your weakest link is your room, if you want a 7.1 setup, you need to move it to a much bigger room.
Do you really have room for speakers behind you? If you think of a theater, the speakers are meant to be well behind you and provide that perspective. If they are right behind your chairs, then they will be too directional. I have back speakers in my theater, which is a long room and in my family room, which is 16 feet wide. The back speakers are great in the theater, but in the family room they are an interesting feature but far too direction to give a good effect. Think of sitting 2 feet from your front speakers. With a 9 by 12 room I have not sure you really have space for a 7.1 system. If you really want back speakers, I would suggest trying them in mono rather than is stereo. You will just be too close to the speakers for good stereo effects.
I strongly disagree with the idea that 7.1 needs a large room. My 7.1 using Triangle Comets and a 15" Earthquake situated diagonally in the corner of a 16'x16' space gets outstanding results.

The biggest gain came from the room correction within my updated 7.1 receiver.

The LCR speakers are on a flat plane with the display. The left and right speakers are just slightly toed by approximately 3 degrees. The side speakers are mounted high on the walls aimed at the listening position. The rears are behind the couch at the rear wall aimed up at the ceiling.

Compared the previous 5.1 setup the matrixed surround is excellent.
Please read my first post: smaller speakers will work better in your room ( OP's room 9'x12'x7'H )
16'x16' vs 9'x12'
Triangle Comets vs Duntech PCL400 Black Knights
Vicdamone - the OP's room is 9 x 12 x 7. How do you put back speakers behind the couch in that size room? That extra 4' and 7' you have make a big difference. You square footage is 2.4 times that of the OP. You can certainly make 16 x 16 work. I am not convinced it is worth going 7.1 for 9x12. is too small to get the effect of 7.1...better off with 5.1 as it will still give the surround more effectively. I have a 7 ft ceiling and it does take that cubic foot out of my equasion as I needed to have mine dropped from the ceiling. But my room is LARGE and I have contained my system to the seating area for the surround effect.
Point taken, I will hence stick to 5.1 and either go for all in wall speaker setup for this room or merge the HT system with my main 2 channel system in the larger room and put a pool table in the den when the kids are in college.

As for the current HT equipment: any recommendation to improve the synergy between the components?
Yes, Hififan, smaller speakers would be preferable. This guy's big Duntechs in that room as well as the mix of in walls he is thinking of using will definitely detract from the surround effect. With the right room correction software it could be acceptable.

I did a 7.1 room smaller than this using Gallo's. The Gallo adjustable mounting brackets were used to wall mount the sides and rears. The reasonably priced Onkyo 616 room correction did a terrific job.

Gallo's are an incredible choice for HT. They're not stupid expensive, they will work in all but very largest rooms, easy to locate, and acceptable WAF factor. With the left and rights on stands they can easily be moved out to a two channel location where they'll image like crazy.

I'm not going to argue that large dissimilar speakers in a small room is the way to go. With a set of seven appropriate sized speakers and a sub in a room that size, 7.1 and 7.1 matrixed 5.1 media will defiantly work.

My suggestion to the original poster is to not merge HT and two channel. Don't go overboard with HT speakers, a processor, and amplification. A modest but modern receiver, seven small speakers, Blue Jeans HDMI and speaker cable, high end subwoofer, and a plasma display, will do it. It's just TV.
Gallo is good suggestion. personally I don't like in-wall, hard to re-locate.
The idea of merging 2 channel and home theater is that I have spend quite a bit on the 2 channel system for component upgrades (in the last 15 months, the only remaining components was the pair of the Dunlavy SC-IV speakers and the speaker cable) to a level I think my ears don't hear much improvement any more. More room treatment will certainly help but very few have a high WAF.

So, as mentioned before, I would use the great sonics of the music system, extending to 5.1 that same room with of course a modern processor. Here on the Gon I see many systems with great speakers (both in size and quality) used in their HT (or sole music) setup so I don't see much harm placing the Dunlavys/Duntechs in a 21' x 30' room with a high ceiling.
Bigger room? When I tried this integration the 60" Kuro in between the mains sucked the sound stage out of my Avalons which are so far out in the middle of the room the whole thing looked silly. The HT went in the den and optimized for HT.

Hope you have better luck than I did.