Can a great system make a mediocre recording sound good?

Depends on the listener  .

@mapman 

+1

Sometimes it's the shortest posts that make the most sense ! 

Play “ocean” by JB3 and then the live version. Totally different.

In my experience, a well resolving system makes a mediocre recording sound worse, as it brings out everything in that recording

Not really, you may just experience a higher degree of "not greatness." 

I have found however, it can cut a little both ways. Several recordings that I thought sounded pretty good went kind of flat while others that had sounded dull took on a new life after I changed gear...

As a wise person wrote above "upgrade at your own risk"

Still, there are many happy surprises...

I just had my amplifier so upgraded that it is essentially new except for the case, and a new pair of speakers so I know what your going through.

Yes, the "room" sound plays a big part but I think you know that already.

I have had many GREAT improvements by doing simple tweaks, like Tip Toes and fuses etc. Try some of those if you haven't already.

There are a ton of inexpensive and DIY solutions that can make a big difference.   Don't throw out your amp just yet... 

And of course price doesn't equal performance. It's a lot of previewing and seeing if all the gear talks to each other well.

All the best on your search for  musical enjoyment!!