It’s starting to make sense the way parkergetdean put it. Nothing is going to beat separating the HT and 2-stereo. Maybe I should rephrase the question. My co worker offered me a Parasound HCA-1000A for a great price. Obviously, a completely separate 2 channel setup would be best, but would adding it to my existing Denon using the preouts improve the sound quality at all?
No, you do not need two separate systems, and just adding an amp only addresses half the problem because you’ll still have the AVR’s awful preamp in the signal path for 2 channel that will remain as a huge bottleneck to performance because preamps matter a lot and preamps in budget, mass market AVRs suck, period full stop. Your best option is to add a good stereo integrated amp (preferably with a HT bypass although not absolutely necessary) using the AVR’s pre outs as then the Denon will be completely out of the signal path for critical 2-channel listening, which is definitely what you want. Given the size of your room and quality of your speakers I’d shoot to more the $2500 range (used) because both quality and power go up significantly for the added $$$. Here are a few good examples just as ideas and any of which would be a huge upgrade from your Denon…
https://www.ebay.com/itm/227103034626
https://www.ebay.com/itm/336323413500
https://www.ebay.com/itm/116732580914
Hope this helps, and best of luck.

