New preamp or up grade my cartridge and or phono amp?

Upgrading the preamp is good advice, and you won’t understand why until you hear one that is significantly better than the one that you have. I.e. avoid a lateral move. I vote for the small dedicated room, with a carefully selected system it can be really good. 

But I'm still kind of stuck on why the preamp is so important if I'm using the "Reference Mode" which is supposed to be a straight shot through. Unless it isn't.

It isn’t.  A passive preamp is closer to what you’re describing (although even those have an impact on sound), and as your prepro is active it’s not even close to a “straight shot through.”  The preamp is amplifying a small signal, which is why it can have a significant impact on the sound that’s ultimately produced, and many (me included) feel the preamp can make an even bigger overall impact on system performance than an amp although this can be very system dependent.  Further, prepros are obviously multifunctional and most are designed to meet an aggressive price point, and the necessary result is that critical/expensive parts (power supplies, volume control, etc.) are compromised to meet aggressive cost constraints.  This is why your $2500 prepro costs the same as or much less than many dedicated stereo preamps despite including all the multichannel, digital, and video processing as well.  I’d guess if all the added functionality were stripped out of your prepro and was sold as a stereo pre it’d cost closer to $1500, which is fairly inexpensive especially as your pre is purported to be fully balanced that nearly doubles the parts required versus a single-ended design.  So while using “Reference Mode” may deactivate unnecessary functions for pure stereo listening and reduce added noise/circuitry to some degree, the signal is still flowing through cheaper electronics than it would through a comparably-priced dedicated stereo preamp, and that makes a big difference.  Hope this provides some helpful info as to why “Reference Mode” doesn’t provide a get outta jail free card as far as preamps go.

ghdprentice/zlone. I understand what you are saying. Though I have a friend who went that route and his listening room wound up isolating him from the rest of the household. He then integrated his 2CH system into the family room HT system. His wife is now listening to more music. 

onhwy61- Your advice struck home, I really do like the sound of my system I believe for the money the Rega components play way above their price point. That being said I will have a few thousand to spend on my system as a retirement present. Right now I’m leaning toward upgrading my cartridge and phono amp or trying something like a Rogue preamp either a new RP-1 or used RP-5. Would either of these be SIGNIFICANTLY better than the Emotiva in Reference Mode? Or is there something else out there that would work (thought about the Parasound Hint P6 but that’s also a kind jack of all things). I really don’t want to go down the rabbit hole of room treatments, new cables, new speakers etc. So I’ll go with either a preamp with HT bypass capabilities or upgrading the phono cart and phono amp. If I’m lucky😇 maybe both

On a side note. With my friend moving his system out to the family room, not only has his wife started to enjoy listening to music more. He has had company over, seen his turntable and asked do albums really sound better. After playing albums and the same tunes digitally (either cd's or downloads), some agreed some didn’t. But ALL were impressed with how good a good system makes the music they like sound. Some have invested thousands of dollars in systems to replace their Sonus or Bluetooth speakers they THOUGHT sounded perfectly fine. One even became a full blown Audiophile with the investment of several tens of thousands of $ that entailed. I’m guessing none of that would have happened if his system was isolated in a spare bedroom(more people getting into our little hobby can’t be a bad thing). But I'm sure for some people that GREAT sounding system in a small room is EXACTLY what they want and or need, it just isn’t going to work for me.

Thanks for the info soix. Any suggestions on a good preamp with HT capabilities other than the Rogue RP-1 or RP-5. I’m thinking the Parasound Hint P6 would put me in the circumstances as the Emotiva just w/out the HT stuff