What should be the first component when upgrading?


I currently have this terrible system:

-Infinity SM 62 Bookshelves (on stands)
-Sherwood RX-4105 Receiver
-Source is Apple Powerbook (iTunes) or iPod

This summer I bought Grados SR80 headphones and they simply BLEW my mind. I heard things in my music which I've NEVER heard before (and this is with MP3's!). I listened to practically every song over again because of this increased resolution.

So naturally I wish to upgrade my above system. I've been researching the last few months and have come up with a couple of options:

-Epos ELS-3/Wharfedale Diamond 9.1/PSB Image B25 speakers
-Cambridge Audio 540a v2.0/NAD C320BEE/used Marantz/etc. integrated
-Hsu research VTF-2/STF-1/STF-2
-Standalone CD player (cambridge audio 540c?)/NAD ...

I just found a VTF-2 on here for 275 which seems like an awesome deal. Just wondering which component you guys would replace and in what order?

I was thinking of getting the sub first because I could use it with my existing system and then upgrade the other components in this order (integrated amp, speakers, cd player) ....

But after reading some more on the forums, maybe I should keep my existing system and upgrade the cd player first (garbage in= garbage out) ...

Or maybe I should get the integrated amp first?

Seriously seeking guidance in building this budget system as this will be my fisrt foray into budget hi-fi .... what would you guys do??
bobcuzi
Thanks for the responses guys, I figured most of you would say source first. Which I do agree with also, although I think speakers can make a big difference.

So here's the deal, my budget right now is kind of limited. I'm talking like around 700 or so for two of the components.

If I had to buy only two components right now (which is what I am going to do), which would I buy? From what you guys recommended, I think I should go for source and amp first ... will that be a significant change from what I have now? I don't want to spend that much for just a small change because I'm limited by my old bookshelfs.

As for room size, my room is smaller (12 x 15), so I think bookshelfs on stands are enough. I'm going to forgo the sub for now and am pretty firmly set on the Wharfedale 9.1's. Any amp recommendations to match these speakers?

How should I partition the 700? 400-500 for amp and 200-300 for source? Sorry for all the questions, but I really value your guys opinion and do not want to make a mistake and buy the wrong components. Thanks again!
It's funny that you would agree with the "front end first" recommendations, yet the (positive) difference you heard was from upgrading the end of the chain (via the headphones). Think about it...

ALWAYS buy the best speakers you can afford and then worry about the rest.

-RW-
Rlwainwright, I guess you are right ... I kind of got lost in this whole gear thing, it's kind of overwhelming and addicting at the same time. Thanks for putting me in my place =)

It's just that I want to get the best system for the money and want to make sure I'll be getting the best "bang for the buck". Especially with a limited budget, I want to purchase the things that will make the biggest difference 'now', not once I spend the rest of the money on the other things.

Rethinking my strategy, I'm going to go for the Wharfedales and an integrated amp because right now those seem to be my weakest link. Unless you guys 'really' think that a serparate cd player is going to make a HUGE difference to what I'm currently using for gear right now, that's what I'll go for.

Thanks Rlwainwright
I think taht the problem here is that you are looking at a system that is limited at all links. Sorry but that is the truth. So you will only hear limited improvements until all pieces have been brought up to another level, IMO. Rl makes a good point about what you heard with the Grados. They are not all that forgiving and if you liked what you had, you might want to consider speakers first. You can get some pretty decent used speakers and CDPs for about the $700 you were considering. Maybe a Music Hall CD-25 which has dropped in price since the 25.2 came out. Probably about $300, which would leave you $400 for speakers. Not sure what monitors are out there at that price range, but if you do a search for used monitors or best speaker for small room our used bookshelf you should get some good answers. Off the top of my head, NHT, Energy, Omegas are good choices but here are lots out there.
The chicken or the egg controversy is well documented. I stand by source>amplification>speakers based on this theory: A great front-end will bring out the best in average speakers, whereas an average front-end will do nothing to bring out the best in great speakers. In an ideal world, speakers are designed to reproduce the signal they are fed. If the signal is crappy, speakers can't fix it. IMO, it's speakers last, just ask Ivor at Linn.