What can I do to upgrade my system? Thanks

The best $400 I have spent for a noticable gain in sound quality was acoustic room treatments. Specifically, the 244 broadband absorption panels from GIK Acoustics. Other companies make similar products, I just happen to have had a very good experience with GIK.

Buying acoustic room treatments is not as much fun as buying new gear, but my experience has been that it provided the biggest differences in sound quality. I also realize that, depending on what room your system is in, there may be less flexiblity to have such treatments (although I ended up putting some paint on the 244s to make them look like art work.)

Some rooms are going to benefit more from this than others, but most normal size residential rooms can usually benefit at a minimum from the bass trapping that a broadband absorption panel provides (and for me the benefit was not just bass, but all throughout the frequency range). I was very surprised at how much the sound improved -- bass, clarity of voices, notes that I was not hearing before, etc.

I had borrowed a $1,500 REL subwoofer from a friend before getting the room treatments, and, in my case, the $400 of room treatments made a MUCH bigger difference in the sound quality than this very good subwoofer.

You can send pictures and dimensions of your room to GIK (or other companies) and get a recommendation with no cost or obligation. There are also some other forums (for example, Audio Circle) that have room acoustic sub-forums to get some input.

Good luck.

Not sure what you have for cables, but speaker wire (Kimber 8tc for example) and a good power cord on the Denon will make a big difference.

I would upgrade your cables. If you can use a rca digital instead of the optical would be good.A highly recommended cable is kimber kable hero for interconnects.kimber 8tc for speaker wires. Try placing your sub as close to your listening position as possible.You can get the speaker wire used for $250 and the rca's for a $100 a set

I think it would be crazy to spend $400 on cables or other tweaks when you have $1000 speakers. Make sure you have good wires, but don't dump scarce money into things that will likely have only a subtle effect on your sound quality. As I see it, your weakest link is the Toslink from the computer to the Denon. You have two options to improve it:

1) Get a USB to SPDIF converter. There are many of these available at various price points and with different features. Depending on the distance from your computer to the Denon, you may want something like the Halide Bridge (which is USB all the way from computer to DAC) or the HiFace (which is SPDIF all the way), or one of the boxes that you can run USB half way and SPDIF half way. A good-quality converter will serve you well if you continue to upgrade your components. Several of these converters were reviewed recently in Positive Feedback Online (#51), but there are a number of others, too.

2) Get an external USB DAC. While the Denon has a DAC, it likely isn't "audiophile grade." The new HRT DACs are not expensive and have been well reviewed, but there are other options -- look at the used gear here on Audiogon.

Personally, I would do #1. In either case, it would be best if you could try out the gear first. Some of the vendors have 30 or 60 day return policies (though you might pay a restocking fee), so you can return the item if it doesn't improve your sound.

(BTW, I don't think you need the HRT pro. It has mini XLR connectors, IIRC. I think the Music Streamer II+ would be the one you want.)

Thanks for all the responses.
My speaker wire I'm using is the lamp or extension cord wire from home depot. Would it be a noticeable difference if I upgraded that wire?

Its about 8-10 feet from my computer to the denon.
I'll look into the usb to spdif converter. What would a decent one be?