For $1600, it's going to be tough to find any speaker that will compete with the ML Sequel II, and this will be particularly true if you are going to replace them with a "bookshelf" sized speaker. In your price range, I would normally recommend the Vandersteen 2Ce Signature, but your listening room is a tad small, particularly since the Vandy 2Ce needs some room between itself and the rear wall to "breath". However, if you can borrow a pair, I think you should audition them before buying something else.
In your general price range, the other choice would be the Magneplanar 1.6's, but they will have the same drawback in a small room as the ML Sequel's.
In your general price range, the other choice would be the Magneplanar 1.6's, but they will have the same drawback in a small room as the ML Sequel's.