Im building a home theater system and value music quality as much or more than theater quality.
One of the first things you need to do to improve 2-channel performance is to get that AVR outta the stereo signal path altogether. Get a good stereo preamp with a HT bypass and connect the front L/R preouts from the AVR into the HT bypass input on the stereo pre. This way when you play 2-channel music the AVR is completely out of the signal path, which is definitely what you want because a preamp is critical and the pre in your AVR sucks. Trust me here, it just does.
Not sure if i need a dac as the marantz allegedly has a good one built in.
No, it doesn’t. A good separate DAC will give you much more and very good ones can be had for only around $800.
As far as media players, can they really improve quality? Wheres a good place to start?
Not sure exactly what you mean by a “media player,” but I’d highly suggest you get a good streamer and subscribe to a good online music source like Qobuz, and rather than having to “compile” a library of music you’ll have worlds of music at CD and hi-res quality at your fingertips. Decent streamers can be had for around as little as $200 - $400 or so.
If you get a stereo preamp along with a good streamer and DAC your 2-channel performance will be at a higher level entirely. I know this is a little daunting at first, especially the streaming part, but it’s SO worth doing — just keep asking whatever questions you have here and you’ll get there. The good thing is you don’t have to do it all at once and can just do it in individual pieces over time, and each piece you add will give you a meaningful performance bump. Hope this helps at least somewhat.