Does an upgrade make sense?

You already know this but the sound stage depth will be limited by how far your speakers are from the wall.  Since you can't move them further away from the front wall  I suggest removing the TV and filling the space with a diffuser.  This will effectively "move the wall back" a bit.  Also, swapping the glass front pictures with something non-reflective will also help.  IMO this is the best upgrade you can make at this point.  Adding better/more expensive gear will have the benefits compromised by the room not being optimized.

I totally agree with the addition of a pair of subs.  Bass traps really help in a two channel system.  My soundstage became much cleaner after adding mine.  Good luck and cheers.

Chord DAC's are quite good and there are a few at various prices that should be fine for your budget range. 

Since you can't move them further away from the front wall  I suggest removing the TV and filling the space with a diffuser.  This will effectively "move the wall back" a bit.

If this isn’t possible you should at least throw a blanket over the TV when listening that’ll also help quite a bit and very simple/easy to do. 

@soix

+1 thick… wool.

Ha! Me too! But I may have the cure for you. Change the way you listen; change something in the room, change the positioning of your equipment. Change before you buy anything. Read "Get Better Sound" and see if there’s anything in there that might trigger an idea. Call the author; he answers the phone.

I got this epiphany from my auto mechanic (side story at end). But the fact is if you listen differently, at a new time or without glasses and reading material or iphone/ipad present, you might hear differently and hear more. Same for other minor changes.

Its a human factor that the familiar becomes mundane. We must work to appreciate what’s in front of us (not going down the marriage tunnel).

Side story: I was speaking with my auto mechanic and he told me that most of the upgrades he does really never fully satisfy the customer prone to upgrading; just makes them want more. After a month they want another 5% and spend big chasing it.

His advice was don’t drive your car as much or drive differently. I was unable to drive my car for a month because of an injury. When I got back in I was surprised at how fast it felt, the handling better than I remember. This also works if I change the way I drive; no radio, windows down, no AC (at night). It just feels different; more engaging, less mundane / less familiar.

All of the above intended kindly, please forgive my humor if you don’t agree.