What should be the first component when upgrading?


I currently have this terrible system:

-Infinity SM 62 Bookshelves (on stands)
-Sherwood RX-4105 Receiver
-Source is Apple Powerbook (iTunes) or iPod

This summer I bought Grados SR80 headphones and they simply BLEW my mind. I heard things in my music which I've NEVER heard before (and this is with MP3's!). I listened to practically every song over again because of this increased resolution.

So naturally I wish to upgrade my above system. I've been researching the last few months and have come up with a couple of options:

-Epos ELS-3/Wharfedale Diamond 9.1/PSB Image B25 speakers
-Cambridge Audio 540a v2.0/NAD C320BEE/used Marantz/etc. integrated
-Hsu research VTF-2/STF-1/STF-2
-Standalone CD player (cambridge audio 540c?)/NAD ...

I just found a VTF-2 on here for 275 which seems like an awesome deal. Just wondering which component you guys would replace and in what order?

I was thinking of getting the sub first because I could use it with my existing system and then upgrade the other components in this order (integrated amp, speakers, cd player) ....

But after reading some more on the forums, maybe I should keep my existing system and upgrade the cd player first (garbage in= garbage out) ...

Or maybe I should get the integrated amp first?

Seriously seeking guidance in building this budget system as this will be my fisrt foray into budget hi-fi .... what would you guys do??
bobcuzi
Well, I guess I disagree with the other suggestions, although I genuinely respect their approaches.

In my opinion, if you're looking to upgrade (whatever that means), and you're considering every aspect of your system as a candidate, then I suggest finding a speaker/amplifier combination that pleases you, and working backward from there. I believe speakers make the most obvious impact on a system's sound...especially when combined with synergistic amplification. I sometimes wish more speaker manufacturer's took the system approach that Bobby Palkovic of Merlin takes with his customers. Bobby will recommend very specific amplification and wiring to maximize the sound of his speakers. Whether you prefer the sound of Merlin is really a side issue. It's his approach that's so wonderful. As I said, I wish more speaker manufacturers did the same.

Without a decision made about the sound one wants to achieve through the selection of speakers and amplifier, I cannot understand how one can begin to select a source, because the quality of one's source can only be really heard after one's speakers and amplification have been upgraded to the extent that the budget will allow.

Anyway, that's my 2 cents. Worth about a penny.
I agree with Tvad, as well, but not, perhaps as strongly as others. As you can see, it's winding up a coin toss which is preferred. It certainly isn't an egregious mistake purchasing your source first. Between amp and source? I'd put my money on (in) the source.
Thanks for the responses guys, I figured most of you would say source first. Which I do agree with also, although I think speakers can make a big difference.

So here's the deal, my budget right now is kind of limited. I'm talking like around 700 or so for two of the components.

If I had to buy only two components right now (which is what I am going to do), which would I buy? From what you guys recommended, I think I should go for source and amp first ... will that be a significant change from what I have now? I don't want to spend that much for just a small change because I'm limited by my old bookshelfs.

As for room size, my room is smaller (12 x 15), so I think bookshelfs on stands are enough. I'm going to forgo the sub for now and am pretty firmly set on the Wharfedale 9.1's. Any amp recommendations to match these speakers?

How should I partition the 700? 400-500 for amp and 200-300 for source? Sorry for all the questions, but I really value your guys opinion and do not want to make a mistake and buy the wrong components. Thanks again!
It's funny that you would agree with the "front end first" recommendations, yet the (positive) difference you heard was from upgrading the end of the chain (via the headphones). Think about it...

ALWAYS buy the best speakers you can afford and then worry about the rest.

-RW-