Wool Blankets as Room treatment

That is a nice looking setup.  An area rug in front of the speakers would help a whole lot; the bigger, the better.  Some kind of absorption or diffusion on the side walls would be nice too; I like diffusion with wall decorations, bookshelves, more potted plants, etc. to break up reflections into a more random pattern.  Diffusion panels from a place like GIK would be good; you can have them covered with blown up images of whatever you like.  

Wool blankets should work quite well.  One of the best rooms I've heard was one where the cement block walls were only covered in spots with decorative wall hangings and tapestries--no obvious and ugly room treatments were applied.  These minimalist treatments are akin to the wool blankets mentioned.

Among the worst rooms I heard--dry, sterile, lacking in life and unnaturally lacking in reverberation where custom-designed rooms where acoustic engineers/architects designed the rooms.  Maybe these rooms would work for sound engineers, but for home listeners I thought they were not good sounding.

I think that a lot of people who are serious about their systems end up over treating their rooms.  I would start small, like you are doing--treating the walls minimally with wall hangings.  It helps to have a carpet on the floor, or at least an area rug so that early floor-bounce reflections are somewhat attenuated.  Book cases, potted plants and other "normal" room objects that are placed to also break up reflections to make them more random would help too.  After that, you might consider corner bass traps--at least these can be not as ugly as other treatments (but, the bigger the trap in diameter, the better).  Another great room I heard was a very large space with modest amount of treatment (ASC corner and side wall traps).  The owner originally put in an extremely large number of such traps, but his dealer, when setting up the custom-made speakers, pulled out more than 60 of such traps.