The, "How much do I have to spend?", argument, sounds reasonable at first, but its almost a guaranteed fail. I know everyone has their theories and percentages, but if you really know what you're doing, you know it just doesn't work like that. If you get it right, it will be by accident.
If you want to upgrade your system, you need to know 2 things. What do you have now and what do you want from the upgrade? Without some type of goal or plan, you can't expect to be successful. Choosing the best component for the job is far more important than how much it costs. Sometimes you can get lucky and be way under budget. Sometimes not. But if you do find a component that you can't afford, you can at least try to find something similar at a lesser price.
I would also try and stay away from the term diminishing returns. If you're an experienced audiophile, you should be able to relate. Focus on your minimum standard instead. Everyone is different, but we all develop a minimum for what we can accept at listenable. For example, lets say you are trying to decide on 2 CD players. One is $2500 and the other is $5000. Most people will say there will definitely be diminishing returns because the more expensive player will probably not be 2x better. And they may be right. However, if the cheaper player does one small thing that you don't like, you'll never listen to it. Your minimum standard may be the $5000 player, so even if its only 10% or 20% better, it doesn't matter.
Getting back to my original point, if you can't clearly articulate what you want from an upgrade, you're not ready. That's the reason you are defaulting to price based upgrades. You don't have a clear path forward.