PS Audio Perfect Wave DAC upgrade to DSD?

PS Audio DAC users - I currently have a Perfect Wave DAC with Bridge II, and it seems to me that the next best upgrade to my system is to convert it to a DSD.  I am a neophyte audiophile on a budget, this purchase will be the only major upgrade affordable in the next 6-12 months, what can I expect in terms of SQ improvement?  

Rest of system is viewable on audiogon systems; the short version is Thiel CS 2.3s, BAT VK-55, decent power supply cables interconnects etc.  Weakest part of the sound to my ears is the high frequencies, sibilance and smear in particular.  Responses in prior posts have pointed out the speakers as a weak link, and that is another potential/next upgrade.  Room is fairly well treated but still being optimized.
I bought the upgrade kit for my PWDII, and have been very, very happy to live with a DS Sr for a year now.  I liked the sound of the PWD a lot, but the DS betters it in every way.
My .02 would be to address the speakers before upgrading the DAC. Assuming your speakers really are the weak link (you said they are, so I’ll accept that), you will get much more bang for your buck by upgrading those or investing in room treatments.  However, if your heart is set on the DAC upgrade, the DSD is amazing and a worthy upgrade. You won’t be disappointed. Cheers.
The Stereophile measurements of the CS 2.3 show an irregular frequency response above the bass, including a lack of energy around 1 kHz and an sizeable rise in the higher frequencies. If you are having issues with sibilance -- it’s not you, it’s the speakers. Other reviewers pointed out "glare" and such.

Exaggerated HF can give killer dimensionality, "air", and that sort of thing, but it also can be really irritating.

I agree with those who suggest auditioning other speakers before changing the DAC. If you’re buying used, Google first to see if measurements are available, and consider models with smooth and reasonably flat, or slightly declining, HF response. They will sound less exciting but also less fatiguing and closer to the sound of a live concert.
I have a DSD, and would be hard pressed to find a better DAC out there for the money (and it keeps getting better with each successive firmware upgrade).  PS Audio does offer a no risk in home trial allowing you to weigh the virtues of a new DAC while you audition speakers.  In my case it was a significant upgrade in sound over the DAC in my Oppo UDP-205 player.  However, if the sibilance is intrinsic to the speakers, you’d be best served upgrading there first.  
My understanding of sibilance is, that it might belong to the recordings, but when we use the term, we are thinking about too much sibilance, that sounds aggressive. And it mostly is not just stronger high frequencies. I think, it is a form of distortion and this can have many reasons.

I was strongly suffering from sibilance too, upgraded speakers (from electrostats to Living Voice IBX R3), my amplifier (now Lavardin ITx), my DAC (now Lampizator Baltic), my music server (now Innuos Zenith Mk3), my cabling (all Lavardin). Of course the jump from electrostats to Living Voice was a big jump as would maybe be with the bright Thiel, but it did not erase any sibilance. Just the presentation was a little easier to my ears, but none went way. And the same is true for all other upgrades.
What did a lot more in erasing sibilance:
- Additional carpet to cover more of the solid wood floor
- EM / RF treatment "voodoo" radiating Obsidian pieces and stickers on all glass (Vortex Hifi) 
- Cleaning power ... and the recent winner for this area is:
.... A Power Distributor with an included "Firewall" custom made from LessLoss
.... And a "Humbucker" power cable, which eliminates incoming EM / RF made from the same LessLoss

Visit their website and you will find my recent reviews.
The burn-in time is awkward, but after 4 weeks I enjoy it all. Sibilance is cut down very low and the remaining is connected to the voices and not just jumping at me. And it has a lot more ... powerful controlled bass, fantastic soundstage, rich sounds ...
It worked great for me, but I have very bad power coming in and plenty of Wifi radiating into our house. So might not be the same for you.
The total of my EM / RF treatment and power improvement cost about half of the electronics, speakers and cables, and I feel, it was worth it!!

Sorry, that I moved the topic away from DSD upgrade vs. speaker replacement :)
Lots of good advice, thanks all.  About a year ago, after putting this first system together, I came up with the following long term plan, based in part on other posts and responses and reviews etc, with the goal being to slowly improve SQ altogether and hopefully reduce the high end smear.  I know that the most direct route might be to replace the speakers, but I also wanted to learn through experience how other changes could affect SQ through the Thiels. 

Here's the plan - 
1) upgrade power cords, receptacles, maybe the conditioner.  I have done all I plan to do there, but the posting above might make me reconsider a different conditioner (would love a PS Audio regenerater but I think SQ/$$$ will be relatively low compared to other improvements, at least at this point).
2) Work on room treatments - this is an ongoing work in progress. I have absorption at primary reflection points, including a heavy wool carpet, added isolators for the speakers and components, ditched the rack and coffee table, read some Jim Smith, etc. This has helped tremendously and I've got a few more improvements lined up over the next 4-6 weeks.
3) Upgrade the source (hence this post) to the best in my budget.  I bought the PWD with the DSD upgrade in mind.
4) Don't mess too much with cables, interconnects, or preamp - I think these are fine tuning adjustments best done when the components are in place, kinda the icing on the cake.  Although seriously thinking about a Supra Cat 8 ethernet cable for the DAC's bridge.
5) Either upgrade speakers or the amp - I am leaning toward higher efficiency speakers, but it will take me a while to figure out which ones, Zu, Joseph, Devore are all contenders but I have heard none of them auditioning will be very hard, hence the choice to do #3 first.
If you're otherwise happy with the speakers, I would consider upgrading the crossovers in your Thiels.  Better capacitors on my speakers (Duelund CAST Tinned Copper on Coincident PREs) eliminated some light smearing and brightness/sibilance in the highs.  There are some threads on Agon documenting the process for Thiel speakers, and I think Jim Thiel's son will actually help you with the process if you contact him (it either happened in the Thiel owners thread, or those folks will know how to contact him).

I'm clearly getting a different experience than others, but I've upgraded my PWD MKII to a DSD twice and both times ended up going back.  I don't know what it is about the DSD that doesn't work for me, but that's been my experience.
cal3713 - talk about striking a chord!  The first response I got when I posted on the Thiel Users thread was an enthusiastic "upgrade your crossovers!"  Tom Thiel (Jim's brother), Beetlemania, a couple other happy modders are fine tuning the design(s) and one day this upgrade might be available through a tbd company or Coherent Source, the post OEM repair/parts/service provider for Thiel.  If I a) had a second pair of speakers and b) knew how to solder, I would be in with two feet bc the trial runs are showing excellent results.

The Thiel thread is one of my favorites - excellent history, design, and anecdotal info re all things Thiel, mostly provided by Tom Thiel himself; lots of good user tips (best amp pairings, how do I fix...., relative virtues of the different models, etc), and although some might perceive small bits of smuggery about the users' preferred speakers, there is NONE of the trolling that sometimes enters into online hifi discussions.  And I have come to trust the listening, interpreting, and writing skills of many of the contributors. Highly recommended and one of the reasons I want to stick with the Thiels!     

All that being said, bummer about the PWD vs DSD - you are the first I have heard having this experience.  What changes for the worse?  
Whoops, should have just gone with "relative" rather than guessing son!  Glad you posted the correction. As for the dsd, obviously many people love it, maybe most. For me, it just doesn't sound natural. Don't know if it's my speakers or what, but I don't hear what everyone else does... and I tried twice.

And I wouldn't be too scared of soldering. Since you won't be putting heat directly on a driver, I doubt you could do anything to hurt your speakers. The worst case scenario is that you over cook a new crossover part, and those odds are low. You don't happen to be in Colorado do you? Happy to help upgrade if you are...
I wish, sadly no, and thanks a bunch for the offer.  You've moved me closer to trying this, some day.
One last suggestion... If you've got the space, you may also consider using screw connections throughout the crossover.  It eliminates soldering and let's you easily swap out capacitors to try different types. That's what Nelson pass uses on his home speakers... see photo #5:
hmmm....thanks for the continuing encouragement....again your advice is nudging me closer to trying.  Still need that second set of speakers tho, else the music dies while the work progresses which would be a very sorry state indeed.
Room treatments: really good idea.

And please look at those measurement in Stereophile and think about whether the speakers should stay in your system, given the issue you have mentioned.

Thanks mike_in_nc, I have looked at the response curve nearly every time someone tells me the speakers are the problem, and yes different speakers are in my future, maybe they should come first but man it’s going to take some traveling to listen and audition, which is going to take some time, and if there’s a patient audiophile out there it sure isn’t me.

re the room, I just got a new chair (geofkaitt convinced me the Poang foam was horrible for acoustics, he was right, if anyone’s keeping score rack one up for the ‘gon’s best jester) and will be building some step diffusers over the next month and keep experimenting with placement of absorption.  I have to make a hard choice re the ceiling - keep a fan or replace it with absorption panels.  Not sure what else I can do in terms of treatments.

So where I have landed for now - better power conditioning, upgrade the Ethernet cable, keep working on treatments etc, hold off on the dac upgrade and start the speaker search.  This should satisfy the demons for a while.  Second pair of speakers will give me a chance to modify the crossovers on the Thiels.  Unless I change my mind along the way.  
@thosb -- Thanks for the reply!

I’ve been in a situation where auditioning speakers required a 4-hour car trip. It’s tough. After buying, I found that what had impressed me were the acoustics of the listening room, not only the speakers. So my journey into room acoustics began....

I will go out on a limb by making a general recommendation with very little knowledge of your tastes. If you can’t audition, and if you like acoustic music mainly, something in the British monitor tradition might be a great choice -- one of the Harbeth, Spendor, Stirling, or Graham models, for example. They are known for natural timbre and smooth frequency response.

I’ll close with the view of an old audiophile. It is interesting to me to participate in different fora. On AV Nirvana, DSP is king. Here, people put a lot of stock in cable swapping. On the Steve Hoffman forum, it’s LPs and midpriced equipment. And so on. After 55 years of doing this, it seems to me that changing cables is a thing to consider after everything else is right. It can sink a lot of money for results that are much harder to hear than fixing fundamentals -- which I consider to be speakers and room acoustics. It is more difficult to do the fundamentals -- the items are bulky and heavy -- but the improvements to be found are incontrovertible.

Whatever you do, I wish you a lot of pleasure doing it!
When I was shopping for my first set of speakers, which turned out to be the Thiels, I did listen to Harbeth and Dynaudia Special 40s, and they just didn’t have the jump factor or immersive qualities I have heard from bigger speakers.  I was starting from a pair of borrowed Maggies, perhaps it was this reference point?  Re music tastes, yes I do listen to acoustic music more than others but do like to rock out from time to time.  I guess I will earn some audiophile street cred by driving hours to listen to speakers.  
It affects us all:  Impressions of speakers change over time, as we listen to them more. What seemed impressive at first can become irritating after six months' listening. I have no magic bullet for dealing with that (but I'm pretty sure the answer isn't swapping cables).

I have found that eliminating slap echo and taming first reflections tends to reduce treble irritation, though it reduces spaciousness at the same time. I've concluded that the spaciousness lost, though pleasant, probably isn't found on the recording, but rather generated by the speaker in the room.