Receiver options
Eric,
Your entry level Onkyo is probably capable of 30-40 watts when driving the full HT.
I think that the RX-V659 would be a reasonable power, performance, and feature upgrade. It also has pre-outs to add an external amp. I have a comparable HTR-5860 and would recommend it.
I have seen a few good deals on older models like the RX-V1600 for <$500 which include a better amp and HDMI switching.
You didn't mention a sub, so that would be an important audio upgrade for the HT.