Just took a look online at the manual for the LS16. It has multiple outputs, both RCA and balanced. You mentioned that you're using balanced cables from the LS16 to your amp, so if you decide to get a subwoofer connect it with RCA cables from the RCA outputs labeled "Main 1". Don't use the "Record" output, as that passes through the signal without volume control.
It appears, though, that your main issue with the ARC preamp is the apparent lack of bass. From your descriptions of your prior systems, I'm wondering if it might be an issue of what you're used to. Many lower end systems for the mass market have over-emphasized bass as that's what a lot of people want. In contrast, most higher end systems strive for a flat response without emphasizing any frequency ranges. There's certainly nothing wrong with that - we like what we like and there's no "right" way to play back music. But that preamp is a very good piece of equipment and assuming the tubes and electronics are in good working order it should be able to give you much better sound quality than the Onkyo.
It appears, though, that your main issue with the ARC preamp is the apparent lack of bass. From your descriptions of your prior systems, I'm wondering if it might be an issue of what you're used to. Many lower end systems for the mass market have over-emphasized bass as that's what a lot of people want. In contrast, most higher end systems strive for a flat response without emphasizing any frequency ranges. There's certainly nothing wrong with that - we like what we like and there's no "right" way to play back music. But that preamp is a very good piece of equipment and assuming the tubes and electronics are in good working order it should be able to give you much better sound quality than the Onkyo.