What to upgrade?

There is a standard for placement of absorption panels...
2 vertical on front wall behind speakers, then on side walls at reflection points. That's to start with, then you may need bass traps, but with that open loft area, it's anybody's guess.
I can tell you that adding treatments gave my system more focus and better imaging.
Try doing some research in the archives.

Panels will usually help in a lively room. Panels should go at primary reflection points on wall based on speaker location and primary listening position. Distance from speaker to closest primary reflection point on the wall will dictate magnitude of the benefit, add one at a time, speaker closest to primary wall reflection point first for greatest benefit, wall can be side and/or rear. On side wall will generally reduce width of soundstage, rear wall reduce the depth. Particularly useful to reduce early reflections that smear detail if speakers are too close to the wall, usually less than a couple feet. Moving speakers further away from wall has same effect. I would determine the best speaker location first before applying any panels as needed from there because that and primary listening position or positions will determine the best locations to apply.

Just for fun I used some quilts (DONT TELL MY WIFE) in areas that I thought may need a little help with reflection and dampening. I know not the greatest of material but wanted to get an idea of what this may produce in sound. It did make a noticeable improvement however it's weak in the highs, Symbols don't shine, shimmer.

Thicker, more padded, household white items are easy and cheap tests to try just to see/hear if any difference at all before investing in panels. Good idea!

If effect is too much, try thinner quilt or reduce surface area covered as needed. Lots of easy household ways to absorb sound without specialized panels, as long as the wife approves. Relocating cushioned chairs or any soft asound absorbent item into the line of fire direct or reflected as well can also help "shape" the sound.

Re all of above. It is a question of balance. You lose highs if you have too much wall covered. Use a friend and mirrors to determine placement of modest size (2x2 ft) absorbent material at reflection points. What do you have for furniture in the room? Some "absorbent" (not leather)couches and chairs(lazy boys) can do wonders for bass. I would also look carefully at your support system for your equipment-especially the cd player to start. If you don't protect equipment from vibration then the sound will definitely suffer as volume increases. This is one of the big reasons the bigger better speakers have more mass as well as solid construction- to try to eliminate vibration from the drivers. I wouldn't spend a cent on equipment until your room and mechanical isolation are to your satisfaction. It will make a world of difference to what's bothering you- and is a great investment in your long term enjoyment. In this hobby you will be happier if you can appreciate getting good sound from a room is a necessary & educational process- that will also allow you to enhance your listening ear and get more enjoyment from the music. Hopefully helpful:)