What do you mean by "digital front end?" Are you looking for some sort of a preamp with music server functions?
Well, I don't know about your speakers being too small. I have a pair of Paradigm Studio 10s with a small REL sub and the setup rocks for parties. My den area is 15X21 and it opens up into the kitchen/breakfast area which is about the same size.
If you're looking for a system that sounds good and is easy to use, I'll build something around a Sonos unit. I'd look at an amp in about the 100 to 150 wpc range and a nice preamp. I'm not going to suggest anything, because all of the equipment out there right now in your price range is good. What's good for you is a matter of taste.
As for the Sonos setup, considering your budget, I'd get a modified Sonos from Wyred4Sound for around $900 and a Synology NAS (assuming that you already have a network setup at your home.
When I have parties, I just leave an iPad out on a table so that my guests can add to the playlist (yes, it's that easy to use).
