I'm not surprised by the sound you have described given your choice for DAC and amp. The Theta stuff (particularily their older stuff) had a harsh and bright top end and lacked warmth. The Thershold equipment has always sounded very "solid state" to me. That solid state charecter is an electronic sound to the music, very artificial sounding. Lot's of sharp detail, really crystal clear, but lacking warmth and musicality. I haven't heard the 802's but heard the 801's several times. I've heard them sound real good and real bad. Being driven buy a Levinson No. 23/26 combo they sounded very much as you described. Driven by a pair of Kebshall 35/70 tube monoblocks and an ARC preamp, they were fantastic. Your preamp is real good and would work well with a lot of different amps. If you want to keep your speakers, I would start by looking for a different amp. If you don't mind tubes, there are several good tube amps available on the used market for not too much money. I just saw an ARC Classic 60 with balanced in's on RAM for something like $1100. If you don't play music too loud, this will probably be enough power and should sound great. Most of the amps from ARC, CJ, Sonic frontiers, etc. should work well with the 802's. If you want to stay with a solid state amp, I think the Bryston 4B ST sounds really good for the money. I'm not so sure it can completely tame your system though. The Classe amps tend to have a warm, rich midrange, very tube like but I found the top end to sound dark (rolled off). I also felt they lacked in over all resolution though they were musical. It's not really my kind of sound but might make your system more listenable for not too much cash. If yoo want to keep your electronic, look for a speaker that tends to be warm and has good bass. I'm not too sure what will work good with that combo. Good luck.
Which way should I go?
I have a system of top-notch components that sound absolutely terrible together. The midrange shouts at you and the high frequencies can become harsh on all but the smallest scale music. My speakers are B&W Matrix 802 series II. The Amp is a Threshold s/350e 150 wpc with a Krell KBL preamp. Source components include the Theta Digital Data II universal transport and their pro Gen II D/A converter. I have tried a conrad johnson hybrid pre-amp, which didn't make the night and day difference I am looking for given the cost needed to make the change. Should I be looking to change speakers, or should I be looking at electronics? I have heard that Levinson matches well with my speakers, but of course the cost is prohibitive. I would like to try and get away with changing only one thing if that is at all possible.