help me build a system for $1200

You're getting some great advice about keeping your current amplification. I believe that the effects of the speaker/room interface will swamp any changes amplification can make. And altering that interface is as free and easy as moving the speakers and/or listening position.
-Bob

I think it is a good idea to keep the Cambridge Audio CD player for your "budget" system.

You didn't say whether you are unhappy with the NAD receiver, and if so, why. Your speakers are obviously not too much. In the absence of further information, I will suggest two strategies.

First, if you are not too happy with the receiver, I think that the best bang for the buck in a small amp is a Creek. They don't come up too often in the used market and often sell quickly. However, look for one in the $300-$500 range. It would probably be a 4000 series model, maybe a 5000 series one. I find themn to be very good relative to other small amps like NAD and Arcam, particularly in bass response. Since you listen to a lot of rock, it would be a good choice. That will then leaves you $500-$800 for speakers. Again, using bang for the buck as the criterion, my suggestion would be PSB. A variety of good models come up fairly frequently in the $500-$800 range, even floorstanders. Given that you like rock, you might find the lack of bass in a monitor to be disappointing. However, given what you are using now, it would still be a vast improvement. If you can find a small floorstander, it might be more satisfying to you than a monitor.

The second strategy assumes that you are happy with the receiver. If so, you can dump all the money into a better speaker. A monitor is fine; however, you will also be more likely to be able to afford to get a floorstanding speaker which will have deeper bass response for the rock music you listen too. Another advantage of this strategy is that the next time you upgrade, you will only have to change the receiver and/or CD player. The speakers may be good enough that they will support a future amp/CD player upgrade.

One of the previous posters mentioned a Totem Arro at a good price in the A'gon listings ($600). That's a good buy for a good speaker. There is also a Totem Model 1 in there. I think it's about $850. That would be a very good speaker too, although it is also a monitor. It comes with stands too. If you choose strategy number two above, I would look very hard at the Model 1 with the stands.

Please come back for advice after you finish med school and pay off your debts. Then we can really have some fun recommending things for you!

I also agree with Daimbert to keep your SB3 and spend $500-600 on a DAC. I have the Ack Dack 2.0 with the high rez caps and I see them for $550. Currently there is one on Audiocircle for this price. Keep your NAD and use the remaining balance on some of the speakers suggested earlier. You will have a really nice system, plus the convenience of computer audio

Keep Cambridge and NAD, add Adcom 600 or Assemblage 1.0 DAC for $150, Spendor SE used at $700, do some nice stands and Signal Cable PCs and wire. Done.

Whow, lots of interesting directions. A lot depends on what you are looking for. I think your idea of the Super-T amp is daring.. and would take you into adventurous territory. It is only about $130 at Parts Express, and you could experiment with full range hyper sensitive drivers, such as those offered by Audio Nirvana (http://www.commonsenseaudio.com/nirvana.html), for about $150 a pair- all you would have do to is find an enclosure for an 8 inch driver- or build your own based on the plans Audio Nirvana offers. You might end up with something special.
For a more conventional direction, I second the recommendations for a small creek integrated, which is going to be a big improvement over your NAD... but only if you upgrade the source too... like with a Lite DAC. Speakers... a lot of people are recommending Vandies... and that is for a reason.
Good luck