PS Audio Perfect Wave DAC upgrade to DSD?

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.