What should I upgrade?

IMO you should upgrade the Yamaha. Keep the item as a tuner, of course, and purchase a better amp. Investing in the system upstream will not yield the right results IMO, as the Yamaha will probably mask much of any improvement...

Yamaha to me among your components are not the weakest link. I would start with speakers.
For the assumed targetting budget, I'd look for nice vintage speakers such as McIntosh, Tannoy or Spendor within $2...300. There are may b plenty in your local craigslist adds. You can visit sellers personally with your receiver and test them in synergy at recommended listening position. Necessary upkeeping of vintage speakers shouldn't be expensive, but would advise to research first once you find ones you like.

Good luck.

If your primary mode of listening is headphones, I would upgrade them AND get a stand along headphone amp. Give us a budget and we can be more specific w recommendations.

Headphones are my preferred mode of listening, my budget would probably be somewhere in the range of $250-$350.

In my original post I meant to say my headphone setup was the card and the headphones. I use the amp on the card itself. The stereo setup is the card's line out, polk speakers and the yamaha amp.

ditch the Xonar DS and buy an HRT Musicstreamer II. I've given one to both my college age sons as the best budget music purchase for PC audio. If you have enough cash left consider one of the Schitt headphone amps for headphone nirvana. I've played with the Xonar DS and the Essence STX...the first is a good gaming card but can't be seriously used for music. The Essence is musical but can't overcome jitter issues the way the Headstreamer II can.

The HRTs are very very good, a real value leader, but given your budget constraints, you might want to consider a DAC/headphone amp combo. If you like the Senn sound, the 580s are considered very nearly as good as the 600 or 650 and much cheaper.

I found AKG K701 step over the performance level of Senn650.
They're the only ones I could listen for long long time.

But those AKG 701s need some power.

I would look into upgrading your headphones and getting a headphone amp. There is a $99 Schiit amp that might work well with headphones that aren't too demanding (maybe check at Head-fi to see how the 701s pair with the $99 Schiit).

AKG 701s are very good, for sure. My thinking is that OP is on a budget, likes the Senn sound. The 580s (and 590s I think) are considered very very close to the 600s and are much less expensive. That might enable the OP to get a headphone amp, as well, which I think would also be very important for upgrading his system.

@Swampwalker
I am not certain that I am partial to the Sennheiser sound, it is the only pair of decent quality headphones I have owned. I do think they sound good, but don't have much to compare them to. They are a hand-me-down from my father who used them for his studio recording stuff, they had some major damage to the plastic that holds the adjustment band, but performance wasn't affected, it was merely cosmetic.
I have been looking for a better solution, but I am not sure about the open headphone design, the passive noise canceling the HD280s have is probably essential to my listening experience, but that said, I don't have much experience with other solutions.

@Davide256
I would hate to ditch the Xonar Essence STX card if I can avoid it, I already did spend quite a bit of coin on it, and thus far I am quite impressed with it. I have used Creative (Crap-vative) cards and M-Audio, among other cards previously. It is surely in a class far beyond. As for the jitter -- I have heard it can be an issue if you are up-sampling a signal rather than running it at a native rate but I tend to run native. The solution you suggested also is not capable of 24/192.

04-18-13: Swampwalker
"If your primary mode of listening is headphones, I would upgrade them AND get a stand along headphone amp."

+1

I own a set of Senn HD595s because of their versatility: they're easy to drive, and sound pretty good. Driving them off of the Xonar Essence wouldn't be a problem. Given your noisy listening environment though, you might want to consider "closed" cans rather than "open" ones. That may well mean a headphone amp. Maybe look at something like the Beyerdynamic DT770. The iBasso D7 or similar would give you a headphone amp w/built-in 24/192 DAC for about $180. A set of used Beyers for maybe $150, and you'd have yourself a significantly upgraded headphone rig.

If you have an iPod or iPhone, get a Pure i20 digital dock and drive a bottlehead SEX2.1 tube amp to your headphones. $89 for the Pure and $450 for the tube headamp. This is the ONLY way to listen to headphones. Analog from the Pure i20 to the headamp. Killer quality for the price. Bottlehead kit is easy to build and tube upgrades are cheap.

Steve N.
Empirical Audio