Likely culprit for harshness at higher volumes?

Try hooking up an iPod or other mp3 player via a mini plug to RCA cable and see how that sounds. It shouldn't sound a clean as your CD player, but might help to determine if the CD player is part of the issue. You could even rip some music in WAV format so that it's not compressed for a slightly better comparison.

Saru - I'm not familiar with your gear, but I am familiar with "humming and then patting your chest -- what should be a smooth sound is disrupted by unnatural vibrations"
In my case it was the simple fact that I was overdriving the room. I was putting too much sound (volume) in there, and the bass interferred with the midrange, mainly vocals.
I fixed it by changing speakers and putting acoustic treatments in the room. That distortion is a distant memory.
Since you have a $0 budget, I suggest that you put some bulk in the room to help diagnose the problem: Blankets, pillows, boxes of stuff, even an extra piece of furniture (cloth). If this helps or eliminates then you know what the problem is. Then you might look for more permanent solutions that look good.
The fact that you rearranged the room and added blankets and got improvement leads me to believe this is your problem.
But do remember that there are limits with any system. You won't be able to play as loud as you want.

Hi folks,

I tried hooking up on iPod Touch -- it sounded terrible pretty quickly. Both my pre-amp and CD player have headphone outputs. I'm going to order the headphones recommended by almarg -- I wanted some headphones for watching videos on my iPod Touch anyway. I also need to buy some known good source material as well.

It does seem that overdriving the room is having a first order effect. I can add/remove much of the harshness I've been hearing just with fabric, although there is still some at louder volumes (loud but not uncomfortable) that I haven't been able to remove yet. I had changed out my KEF C75 (floor standing) with KEF Q10 (bookshelf) - this seems to have helped a bit but still experimenting. I think the Q10s are less efficient than the C75's -- it seems I need to increase the volume setting on the pre-amp to get similar volumes levels as the C75. I'm also playing around with fabric (sheets, towels) placement.

I'm also trying different speaker placements to get the imaging right. I'm beginning to think that even if I had the best stereo equipment in the world, it would still sound lacking unless I know the art of speaker placement and room acoustics.

Here's a few CDs that I have that I consider to be some of my best recordings. I think they may be something that you'd enjoy listening to. Amazon.com sells all of them.

Bach: The Brandenburgs - Jacques Loussier Trio

Violin Solo - Ning Feng

Holst: The Planets - Gustav Holst (Decca, Los Angeles Philharmonic Orchestra, Zubin Mehta)

The Canadian Tenors

Tanking a Chance on Love - Jane Monheit (the 1st song on this CD was a favorite demo for the salesman that sold me the majority of my audio system. He would jokingly say, "If you don't like this, get the hell out.")