Next Step Advice

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.

Thank you very much for your responses. They have given me something to think about. Mainly, dumping my HT system and going with a 2 channel system. The DAC suggestion is something to consider in the meantime, the Cambridge DACMagic is fairly inexpensive and worth a try. Ultimately, I agree that trying to intergrate both HT and the musical quality I want is probably not worth pursuing in a HT system. Thanks again!