Need help determining next upgrade - 3rd ATTEMPT

Another vote for room treatment. I was very surprised at the improved resolution room treatment provided. I would put acoustic panels ahead of any new equipment purchase and even ahead of optimizing speaker placement since acoustic panels could well alter your optimum speaker placement. I called GIK Acoustics and also emailed them a diagram of my room. Their technical people were very helpful. I ended up buying 2 corner soffits, 2 bass traps (for wall behind speakers) and 4 regular acoustic panels for side walls. These made a very enjoyable difference. Good luck to you.

So most comments seem to be angling toward speakers, room treatments and speaker positioning. The room is 12x12x8, so not very large, and square in plan. The guy that treated the Odyssey room at last years RMAF pretty much demanded that I coat the rear wall of the room with sound absorbtion, more important than side reflection in his opinion.
I really thought someone out there would say "AMP!" but that hasn't happened, very interesting.
Schubert what defines a cheap crossover? Don't know much about them.

Description of the 22L2's crossover from the TechRadar review:
"Fed from twin terminal pairs, the crossover unit has a glass-fibre circuit board with large, non-interlacing tracks. Components (mounted to avoid magnetic inter-modulation) include air-cored inductors and metalised polypropylene low-loss capacitors, and the internal wiring uses heavy-gauge oxygen-free copper."

I am for the most part in agreement that speakers are most frequently the primary cause of smearing. Next most likely, in my opinion, is the preamp, but that is just based on my personal experience.

Small square rooms tend to be particularly problematical, and I second all of the responses that have focused on room treatments and speaker positioning. In fact, looking at the photo of your setup I would be very surprised if you did NOT have the kind of smearing problem you have described.

I also particularly second the person you quoted as having "demanded" that the rear wall be treated (assuming he was referring to the wall behind the listening position). You are undoubtedly seated very close to that wall. Reflections from it will arrive at your ears strongly, and without a great deal of delay in their arrival time relative to the direct arriving sound. Again, I would be very surprised if that were NOT a major contributor to the smearing you have described.

Also, as Mapman suggested the speakers are probably too close to the front wall (the wall behind them), and they are probably too far apart.

As an experiment, at least, I suggest that you try a "near field" arrangement, moving the speakers several feet out from the wall, placing them much closer together, and moving your listening position further from the rear wall (the wall behind the listening position). (Keep in mind, though, that if you get too close to the speakers their multiple drivers may not blend optimally). That should give you a better idea of how your present equipment is capable of performing under better acoustic circumstances, and whether upgrading any of it is necessary.

Good luck. Regards,
-- Al