We just moved one of our systems from one room into another. If it had started out in the latter room, we would have surely traded out components and cables in order to 'get it right'. Only because we've already heard the system in the first room do we know that it works for us, because right now in room #2 it sounds mediocre at best. So yes, Rpatrick, the room treatment is crucial. I've been in several listening rooms in which the treatment simply negated the effects of the room, and the speakers which were seven feet from me sounded almost like headphones. No joke.
Also, Magnepanmike is absolutely right that the improvements up the audio cost ladder are often huge. However, the question is always "Does that work with the other components toward the end goal of meeting MY standards of satisfaction?" Everyone seems to agree that spending more often gets you more, but is it necessarily more of what YOU want? I've literally gone from one opinion extreme to another after doing something as simple as swapping out interconnects. And the component I was deciding whether or not to keep were the speakers, not the interconnects.
Hopefully, all of these responses have answered your initial question.
All the best,
Howard
