How can I improve my HT audio?

You can try DefTech 2006 TL for your L/R, list $1200 new. They are great for HT application and have integrated powered sub, BTW. I auditioned them with McIntosh amplification against Paradigm Ref. 100v2,which I ended up buying (primarily for music), I was quite impressed with DT's for HT.

The sub does not need to be the same make as the rest of your system. The crossover may not be an issue either because your pre-processor has an electronic one built-in. Run the sub crossover off or wide open then set the volume level with test tones and a meter. There are a number of good subs out there. REL seems to be a favorite for musicality. M&K and Velodyne is another good place to start. Try a search on best subs in the archives.

At the risk of opening a debate that will never be settled, I would not agree that you should "avoid dipoles/bipoles". True, the shift to DD5.1 convinced many people that direct radiators were a better bet than dipoles, but there is by no means a concensus on that. Specific brand, placement, room acoustics, and many other factors enter into the equation. YMMV. Listen to both.

good news (since I own dipoles :) But what about the bass? Better to go with sub or match buy matching front channels-- big difference noted b/t infinity and DT. What would be a better value?

Thanks!

I would match your speakers first. Move the Kappas to another room. Use B-system (multi-room) speaker outs on your receiver if it has that feature. If you have no use for them, sell them and add that to your theater budget.