Best upgrade for the money ?

Before changing any equipment following Dekay's advice. Speaker placement and vibration issues are the most effective tweaks. Your interconnects and cables are fine, they should be the last thing you need to change. After you address the setup issues your next step is to upgrade your source. But I suggest that you wait until the new digital formats have settled out (maybe 6 to 12 months). Your system can be upgraded, but your budget is insufficient to effect a fundamental change. New cables, cords etc. could help, but they are halfway measures. By this I mean they could produce an improvement in sound in your present system, but they might not survive your next level of upgrade. Be patient and take your time. New equipment is not always the appropriate answer.

What? Are you all from Mars? IT IS THE SPEAKERS!!! Have you ever heard Polk speakers with any thing close to resolution? Depth? Good imaging?

If I were you I would take my Polk speakers to a high end store and compare/contrast them to other speakers. If it's not the speakers I have had the most improvement by adding a Bel Canto Dac-1 and/or the Black Mamba (used)or EEL power cord purchased on auction.

I must agree with all those who suggest speaker placement and room acoustics as a first step. Speaker placement is free, except for your time, and room treatments can be as simple as rugs and curtains or as complex as ASC or EchoBuster acoustic panels and bass traps. Both can make or break a system - no matter how good the equipment. There are a number of web-sites and magazine articles that have helpful tips and hints on how to go about placing speakers. I was, and am still, having a problem with certain bass frequencies. Robert Harley's book on high-end audio talks about room resonance modes (frequencies that are exaggerated due to the room). I used his formulas and calculated the resonance modes. I went to Radio Shack and bought a handy-dandy SPL meter and tested his theories. And what do you know?...the calculated modes matched pretty closely to the measured ones. My point is, that I could have assumed that it was my speakers, or my amp, or my preamp, or...well, you get the picture. Now, an amp with thinner bass would probably work well. But, in my opinion that wouldn't fix the real problem. The room is the real problem. Think about upgrading electronics *after* doing the free stuff...speaker placement and room acoustics (I suppose rugs and curtains aren't exactly free). Whose knows, you might find that your system is as good as you need it to be for the moment.

I've got to agree with Dekay, Glreno, and all who support the need for speaker placement and room treatment. The most important thing about speakers, as with real estate, is Location, Location, Location. Once you've addressed these basics, then take a look (listen?) at your speakers, electronics etc. I have 5 ASC tube traps and 3 ASC panel traps in my listening room, and I consider them essentials. I'd also like to try the room lens. But you don't necessarily have to have the pro products-- like ASC, ie they're sort of expensive. Along with speaker placement, furniture, wall hangings, and anything that will act as diffusors (book cases?) can be useful. Also read Robert Harley's book "The Complete Guide to High End Audio", 2nd edition. This is all IMO. Good Luck. Craig.