Currently I'm running a HT system I put together over a couple years during college (think it was a great investment of my student loans

). Now that I actually have money and I have all the original pieces in place, I'm looking to start the never-ending process of upgrades.
So to preface my question, here is what I've got right now...
TV: 42" 1080P Sharp
Receiver: Harman/Kardon AVR 335 (7 x 75 watts, no HDMI)
L/R: JBL Northridge E80
C: JBL Northridge EC35
Side Surround: Yamaha somethings I stole from my dad.
Rear Surround: JBL Venue Balcony
Sub: JBL Venue SUB10
Wire: 10-gauge to the L/C/R
14 or 16 -gauge to the surrounds
PS3 and a Wii
I've got $1000-$1300 I can spend. Basically I'm trying to figure out where the best bang for my buck would be.
My thoughts:
1. I'd like to make a move towards separates. I've been looking at both Outlaw Audio and Emotiva. They both seem to be well respected high-value manufacturers. I thought it best to grab either the UMC-1 or the Model 997 when they finally, if ever, are shipped. While using my AVR on pass through as an amp. Reason being that with a PS3 and HD cable I'd really like HDMI on my processor and I would finally be able to take advantage of the Dolby TrueHD. I would be able to purchase an amp later.
2. Purchase an amp and get a new processor later. This will get me a little more power all across the spectrum, but I worry that it could end up overpowering my Sub? It would also allow me to get something with all channels driven. I was looking at something in the 7 x 125 watts area. I was also curious if getting Outlaw's 7 x 75 would be a justifiable improvement over the HK or if I should always be looking to upgrade the wpc.
3. Upgrade my Sub to something with a little more oomph. Possibly continuing using the SUB10 as a second sub. Again I was looking specifically at the Outlaw's LFM-1 EX. Its a down-firing 12" sub with 350 watts and going as low as 16 Hz, which I know you can't technically hear, but can certainly feel!
Other considerations:
I am a bit space constrained at the moment. I have my TV mounted on a pretty decent stand with plenty of horizontal shelf space. It works well for my current components but anything bigger than my HK ~ 7" will not fit height-wise and I unfortunately don't have a good spot for a component rack.
I'd like to upgrade my speakers, and I think regardless the Yamaha's have to go (afterall they were throw-ins *see free when my Dad boughth is receiver). However, I don't envision having the necessary cash in the near future to to get what I would seriously like (nor do I have the time/money to drive somewhere besides Best Buy to audition said speakers).
So for the question...given my current setup where do you see the best value upgrade? I think that I could stretch my upgrade budget to encompass two of these but once you throw in cables, shipping, et al. it gets pretty expensive. I also wonder if I would have the necessary wattage to drive better speakers?
What in your experience has usually yielded the best results?