Dynavector XV-1S ---is it overkill for my system?

I think you are confused a little. The cartridge you have is more than enough, but your speakers, power amp, Cardas cable and possibly speaker cables scream to be upgraded. After it's done, upgrade step by step your entire front end and then you will have hi-fi not mid-fi.

Sorry, but I would say that yes, the XV-1S is absolutely overkill for your system. Enjoy your system as it is now, it looks fairly well balanced. If you feel the need to upgrade, spend the money more evenly and upgrade more units.
Simply putting a world class cartridge in a nice budget system will make no more sense that putting a world class phono stage (Aesthetix Io) in a nice budget system. Balance is the key to any system.

Clearly the contrarian here, I continue to say: the Classic table and tonearm are competent units and you will hear an improvement with the XV-1s. Are there better tonearms than the Classic 1? Well, yes. But it is certainly competent. As is the turntable. If you upgrade the table or preamp, you'll not outgrow the XV-1s and, in the interim, you'll have better results than the 17D,

And I agree that if you improve the phonostage, you'll hear more of what the XV-1s delivers. (I'm assuming your current phonostage, which I don't know, is at least able to deliver the gain needed by the XV-1s.) If you later upgrade to one of the top tonearms, you'll hear even more of what the XV-1s can deliver.

Bottom line, I think the Classic 1 turntable is certainly a good enough table and arm combination to allow the XV-1s to perform a up to a fair degree of its capabilities. I've heard it in systems with less capable arms than the Classic 1.
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Great responses everybody, I really appreciate all the input! I'm leaning toward agreeing with those who feel that the XV-1S would indeed be overkill in my system. The best approach seems to be to upgrade in a smaller increment, and to do it more evenly throughout the system---for example, I could upgrade both the phono pre and the cartridge at the same time, with the same amount of money. Now I'm thinking about a Dynavector XX-2 MKII with a better phono preamp, but that's the start of a whole other thread---any phono preamp suggestions? Solid state or tube? Believe me, in the last few weeks I've been researching phono preamps like crazy, and very few seem ideal to me, when I factor in features (gain, loading), sonic characteristics, price, availability, you name it. For example, I love the idea of getting a tube phono pre, but I'm afraid of having a higher noise floor, and losing the low frequency extension and "slam" I need when I listen to Funk, for example.

Personally, I've succumb to Lloyd Walker's sonic philosophy that uses a solid state phono stage. This is mostly due to modern times with cartridges having smaller output voltages. SS is just a more stable amplifying device for very, very small signals. I still prefer tubes in my line stage and amplifier, but I have been very happy since moving to SS phono stages.
My favorite has been the Klyne 7PX5.0, but these may be out of your price range. If I were you, I'd keep my eye out for an older Klyne phono stage. They don't come up often, but it will be worth the wait, IMHO.