What should be my next upgrade? Speakers?

Yes, I agree that I didn't give much info : ) sorry.

System:
NAD NAD T-754 Multichamp
Denon DVD-2910 CD Player
Monster HTS-3600 AC filter
(2)Klipsch RF-3 Front Speaker
Klipsch RC-3 Center Channel
(2)Klipsch RS-3 Rear Speaker
Paradigm PDR-12 (SUBWOOFER)
Monster 400 HDMI Interconnect(DVD to TV-Video)
MIT Terminator 3 NT Interconnect(DVD to TV-Audio)
Analysis Plus, 2.5M Subwoofer Cable Interconnect
Monster Video 3 (Video), 3 Video Component Interconnect
Monster Toslink Interconnect
PS Audio C7 Power cord
PS Audio XStream Prelude Power cord
Monster Cable Z3 Reference Speaker cable
Isonodes Bright Star-Large ($20)-located under DVD player
Mitsibishi DLP 1080i only :) Bummer, no 1080p yet.....

About the room:
Size: 18' wide x 12' depth x 8' high
1-Large window 65" x 62"(located on right hand side of room on the 12' depth)

Floor:
Pergo wood with 5'x8' shag rug located in front of couch and TV

Furniture:
1 leather couch with ottoman
1 leather chair with ottoman

The couch is positioned center to the TV (9ft)

The two speakers are 12 ft apart and slighty toed in.

The 2 surround are located on the rear wall approx. 5.5' ft high and are parallel to the front 2 speakers. The center channel speaker is located right below TV and tilted up slightly. Hope this helps with letting you know what my system looks like. I plan on taking some pics soon. Thanks for any feedback.

80%+ of my time in this room is watching movies/HD TV.

Agree w/ Viridian- do not forget those cables!!!

I can certainly understand how better minds than mine, like Kal and Al, can disagree with cables being of issue in this system context. On the other hand, why not offer your own advice and guidance to the gentleman?

If your budget can handle around $2200 for front main speakers, you might consider the Martin-Logan Source. They have been widely raved about for transparency and overall performance for the money, and I suspect would provide a huge difference relative to just about any dynamic speaker that costs significantly less. I should say, though, that I have not heard them myself, and that I have no feel for how well they might mesh with the other speakers of your multi-channel av system.

Regards,
-- Al

I should add to my previous comment that the Source's are 8db less sensitive than your Klipsch's, with similar power handling capability. So if you typically use most or all of the volume capability of the Klipsch's, the Source's would not be suitable. Essentially, I would expect the Source's to give you better transparency, accuracy, and detailing, while sacrificing peak volume. Their bandwidth specs are pretty similar.

Regards,
-- Al