What, if any, component to upgrade? Advice?

Simao - Let me throw you a curve ball . . . all your current gear will sound better with acoustical room treatments! Best darn upgrade you can make. It isn't a bright shiny new toy like an amp or whatever but it can be used to widen soundstage, attentuate bass modal peaks that muddy the mid's and highs, reduce annoying flutter echoes, and much more. Unless you are sitting very near field, what you're hearing is something akin to 50% equipment and 50% room effects. Taking the DIY route allows the most flexibility, cost savings and the option of over engineering it if you like to meet your room's unique requirements. Oh yah, buy yourself an acoustical measurement tool such as Dayton Audio OmniMic which is an essential tool! Goood luck.

Kevinzoe
I struggle with room treatment, because I was told to do it right will cost between 5 & 10K. Do you think room treatment will improve every room?

i would agree with the dac suggestions. i have spent the last few years adding better cables, better room treatments, better tweaks. i got some good results. but two weeks ago i replaced my music fidelity v-dac with a emotiva xda-1 because it had 6 inputs for flexibility and it changed my system from ok sounding to pretty remarkeable. i'll spare the flowery language but i now have a image that is 3 dimensional.

My focus is on the source side so anything to improve that is should be more important than downstream (unless you have a weak link, like the absence of a DAC in your case). Clean sound comes from clean power/signal and what you hear should not be cluttered by too many or strong indirect reflections. In your case I would certainly invest in a good power conditioner as that would benefit all items in your system and subsequently, power cables and interconnect upgrades. Cheap tweaks in isolation (a must for source devices) and vibration control (amps and speakers) should definitely be considered, there are numerous entries here on the Gon about that. Room treatment can be more difficult as to find a compromise between room aesthetics, according to your partner's opinion, and room acoustics, unless you have a dedicated listening room. My practical advice for the first grand (you can never stop, that's the fun part!) would be:
1.) buy an used power conditioner for $300 (heck even a cheapo Belkin PF30 or PF60 is better than nothing) and replace the wall sockets with hospital grade ones (e.g. Hubble or PS Audio)
2.) an used DAC for $600 (many contenders)
3.) isolation tweaks (Herbie's Tenderfoot, Vibrapods which are very affordable).

Simao, we have not heard back from you so maybe you could sum up what you have done or going to do and we could go into the second iteration of advice/comments.

I totally agree with Lloydelee21. Your speakers have what I would consider minimum power, and adding a more powerful amp would be beneficial in many ways. To change speakers, then you need one with a much higher sensitivity, maybe 96dB or higher.