Hope you're sitting down : )
You've got several factors going on here. Individually, they might not be that offensive, but when combined, you're getting clobbered.
The Legacy III's have typical Legacy bass response. The output between 40 Hz and 150 Hz is appr 5 - 7 dB's above midrange level. Below 40 Hz, the output falls like a rock. While the added upper bass tends to fill things out at very low volumes, this tends to make everything sound "heavy" or somewhat "slow". As you raise the volume and drive the woofers harder, the added bass weight will become even more apparent.
The lower midrange / upper bass has a slight dip centered around 200 Hz or so. This typically has to do with floor-bounce and cancellation due to poor driver positioning in the speaker itself.
From appr 400 Hz to appr 2 KHz, the output is relatively smooth. It is slightly more pronounced than the frequency range directly above it though. This tends to bring the tonal balance forward, making things a little more aggresive sounding in the mids.
From appr 2 KHz to appr 9 KHz, the output gets slightly softer as frequency rises. The harmonic overtones of the human voice and many instruments fall into this region. Since the primary notes are presented more aggressively than the harmonics, the timbre of notes are altered and the presentation becomes less cohesive.
Once we hit about 8.5 to 9 KHz, output dwindles rapidly. Above appr 8.5 - 9 KHz, high frequency energy falls off at about 5 - 6 dB's an octave. This is a drastic reduction in output and is quite noticeable.
While there aren't a lot of instruments up that high, there are plenty of harmonic overtones generated by other instruments that will make it up into that frequency range. Reduced output in that frequency range tends to reduce air and detail* and makes everything sound "closed in". As you drive the speaker harder, you'll reduce upper treble response even further. While this happens with all speakers to some extent, the effect of this is compouned due to the fact that you're already way down in output in that range at normal levels. Kind of a double whammy.
As a side note based on past experience both inside and outside of Legacy products, the crossover design could use some work. The upper midrange and treble drivers also aren't countersunk, which increases baffle related distortions and introduces further non-linearities ( peaks and dips ). By correcting problems in the crossover and countersinking the drivers, you can reduce the somewhat harder upper midrange glare that is present in some of their larger designs. If you don't want to go inside of these ( or any other speaker ), covering the entire top end of the baffle with a layer of felt will work wonders in terms of reducing glare & sibilance while improving imaging.
As to your current electronics, let's take a look.
I am not familiar with the Krell KAV 300 cd player in specific, but the Krell cd's that i've heard in the past tended to sound somewhat hard and bright sounding. Upper midrange glare was present to a noticeable extent. I know a few guys that had these and they tried to tame this sonic trait by using cables from MIT, etc... Outside of the crossover / driver mounting problem in the Legacy's, this player might be part of the "hardness" factor that you're encountering.
As far as the Sunfire preamp goes, it is pretty mellow sounding and has a slightly sunken upper midrange response. Carver made no secret about the fact that he liked the sonic traits of "dip" in this region, which tends to smooth things out. Given the fact that most digital gear / digital recordings tend to sound hard and / or highlight this frequency range, this "dip" may help some systems to sound more natural. If you had a preamp that was actually more neutral, you would probably have a bigger problem with a hard, glaring upper midrange.
As far as your Levinson goes, i'm not real familiar with their amps. From what i recall, they are a little "soft" sounding and lacking in dynamic punch. Out of your CD, preamp and power amp, the amp is probably the most neutral sounding.
Your cabling is all relatively neutral to "warm & smooth" sounding. Given the rolled top end of the speakers and elevated bass response, cabling that was slightly brighter / more open sounding might help here. Then again, that might highlight the hardness in the upper mids that you're also experiencing.
Based on the above, you're speakers are "flavouring" everything that goes through them in the exact manner that you describe. That is, they are dark sounding ( elevated bass with reduced treble ) and have a slightly forward midrange presentation. While changing your components may alter some of those traits to some extent, any benefits that you introduce into the system will still have to go through the speakers before you hear it.
If i was in your shoes, the speakers would be the first thing to go without hesitation. If you REALLY want to keep your speakers, the primary suspect that i would look at would be the CD player. Problem with going to a "better" CD player to alleviate the possible "hardness" that you're experiencing is that many better players also have a "softer" presentation. This is only going to aggravate your lack of output in the treble regions from your speakers and make things sound warmer. In effect, you are in a vicous circle. Unless you do something about the primary cause of your problem i.e. the highly coloured speakers, you are going to have a tough time.
Obviously, this is only my opinion based on the information that you've provided us with. Hope what i said came across in the spirit intended. Sean
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* This is the reason that John Dahlquist used a Piezo Super-Tweeter in the DQ-10 design. The output of the dome that he used was starting to taper off, so he highlighted this region by adding the Piezo. This gave the speaker "added detail" and "brilliance", but sounded "splashy" or "smeared" due to the use of such a low grade driver.
