Next Step Advice

What's your budget for an external DAC???

You can get a VERY good DAC for just $400.00.

If that's all you have to spend, then try Cambridge Audio's DAC Magic. You get a whole lot of music and performance for just a hair under $400.00.

I am using one with my Wadia i-Transport 170 and my Apple i-Pod Classic (160 GB -- w/NO compression).

--Charles--

I would suggest more power from a warmer sounding (colored)
amp for the front three speakers which all should be increased in size and run as large .

I have the Rotel 1095 and would consider this as the minimum for power , for your room , but not very warm sounding . You have a fairly large room to fill with sound , as per your desire .
You will need some large speakers , especially the bass , that can move some large amounts of air . Try not to depend on the subwoofer for your music listening .

On the otherhand , there are two alternatives .
A) If you have the system on the short wall and listening position back aways from there , you could switch the components to the long wall and move your listening position to the opposite long wall . This would effectivly make your listening room smaller and put you closer to the speakers .
B) You could get an integrated amp (tubed) to use for the 2 channel music only listening . But again you would probably need larger front left and right speakers .

The DAC suggestion is worth a shot for the richer aspect .
But I just don't think that the fuller room filling aspects will be achieved with that amp and speaker combination .

Good luck .

Saki70-why do you consider a warmer sound colored??

I would tend to agree with Saki70. While Paradigm speakers are a good value I was never satisfied with there Studio 100 (versions 1, 2, 3, and S8) presentation or personality. Switching to a PS Audio HCA-2 and later to NuForce SE's helped a great deal smoothing out the mid and upper range while improving their bass response IMO. I ended up spending a great deal more for the speaker presentation I was looking for in my two channel system.

I gave up on trying to integrate two channel and HT some time ago. I'm using Triangle Comet and Comet es in my Pioneer SC-07 powered HT system with great success.

Um, things that are not being mentioned or likely considered here, is the room setup and acoustics. If you have a low 8' ceiling, or sit relatively far back in relation to your setup, you will be getting lots of acoustical challenges to muck up your sound - especially considering the configuration and design of the speakers you're using (tweeter over mid/woofers, and non-first order cross design).
The room acoustics, setup and tweaking are always going to be 50% or more of the sound. So you can't usually have a "how do I get better sound" conversation without including all that, really!
Still, I see you have a Wadia transport, and are mentioning DAC's. I've experience with your Paradigms and Rotel first hand, and can tell you that those components can be swapped out for a larger gain in sound improvement than your digital front end considerations!
You're talking about upper mid-fi speakers and electronics. Get some higher end more refined speakers and amp and preamp setup, and the sound would improve much more dramatically I think.
Still, yes, you must make sure you've addressed your acoustical issues. Otherwise that will hinder your sound quality greatly. So consider.