Definitely if you are in square or nearly square room, that would - in most cases - explain the "wooly" sound. What's happening is that as bass and mid-bass frequencies reflect off of your walls, they double back on themselves which leads to some frequencies getting cancelled and some frequencies getting abnormally boosted. Also, with the speakers only 1 foot or so from the wall behind them, you are getting some extra bass and mid-bass reinforcement as the lower frequencies escape from the port on the back of the speaker and reflect off of the wall that is quite close behind them.
If it were my own room and my own setup and my own money to spend, I would start with treating the room with acoustic panels and some bass traps before I would upgrade my speakers at this point. Now, that is not to say that a speaker upgrade may not also improve the sound that you are hearing. But, in my own experience, I would get the highest value for my money by treating the room's acoustic issues, so that is where I would start.
I can't guarantee that acoustic treatments will get you completely to where you want to be sound quality wise. But I can say with a great deal of certainty that the sound will improve. Also, if you do decide that you still want to upgrade your speakers - even after the acoustic treatments are in place - they will now be in a much better acoustic environment and that will help them to sound even better.
I'm personally a big fan of Auralex Acoustics and their products. You can certainly go the DIY route and possibly save some good money that way. Myself, I'm not very skilled when it comes to making panels that look good, so I've opted for the pre-made stuff

The Auralex panels are also physically thinner, which I prefer in a smaller room since it doesn't drastically decrease the size of the room itself. 4" - 6" thick panels certainly can work very very well, but I find them a bit of an eyesore - especially since I'm no good at making them look good myself
Anyways, I like to recommend the
Auralex Alpha-DST kit for rooms that are the size of yours.
I recommend that you place the bass traps - one in each corner. Then use the acoustic panels in the following way:
- treat the front of the room mostly. Put a couple panels directly behind your front speakers and then some panels on the front wall inbetween the front speakers. Sound coming from the front of your room should be very clear and pin-point precise, so you don't want reflections coming off of your front wall and muddying the sound!
- treat the reflection points on the side walls. Imagine a billiard ball being shot from the front speakers, off of the side wall and bouncing to your ears. Where ever the ball would have to hit on the side wall to make that shot - put acoustic panels there.
- put some panels directly behind your seating position. Sound from the front speakers should "wash over" you and then disappear. It shouldn't come bouncing back to your ears off of the back wall!
- if you have any panels left, you can also put them on the ceiling. Same idea as the reflection points on the side walls. Where ever the sound would bounce off of the ceiling at to your ears, you can put panels there.
Treating your room acoustically makes a bigger difference than most people expect, so I really think this would be well worth your while. There are certainly alternatives to the Auralex Alpha-DST Kit that I mentioned (the kit is also available in different colors), but to me, it's a nice $400 package that gives you pretty much everything you need for a room your size and it's physically not too big, so it's pretty easy to use.
Best of luck!