These are the changes I made:
I connected both RCA inputs of sub #1 to Emotiva unit using a splitter, and then connected the 2 subs together via the first sub's outputs with 2 more RCA cables. This increased the volume substantially.
I measured the distances for each speaker and sub and set them correctly on my Emotiva unit. This seemed to help somewhat with the clarity issue.
I bought an SPL meter at Guitar Center (never thought I would ever make that purchase there) and did the best I could setting the levels equally using the Emotiva unit's noise signal. It is not an easy task, as the meter fluctuates constantly within 1 decibel range, sometimes even more. I wouldn't say my house is exactly noisy either. Only the right speakers needed adjustment, but it did make a difference in the overall balance. I was surprised that after equaling the speakers' 75 db reference level, the subs were louder than what I am used to. I had them turned down by up to 6 db for some movies afterwards. I listen at levels where movie dialogue sounds like people are talking in the room, and quieter at night (respecting my neighbors). I can't even imagine what setting the subs to 80 db level (as advised by one Audioholics article) would be like.
I changed the crossover to 80 Hz with a 24 db/octave slope and did not experience the localization issue I had before. I think having 2 subs really helps masking it.
So, the soundstage issue did improve, but didn't completely go away. Although to a lesser degree, I still experience that effect of music sounding like there is a bit of foam in my ears, a sensation that makes you want to turn your head to hear better. I really think phase is to blame. Can I utilize the SPL meter to fix it somehow?