5+ years since my last theater upgrade. What would you do?

Personally I would go this way for a receiver. http://www.accessories4less.com/make-a-store/item/DENAVR3312CI/DENON-AVR-3312CI-7.2-Integrated-Network-A/V-Surround-Receiver/1.html but a comparable unit from Yamaha if you have a loyalty is just as good.

A new receiver will get you room adjustment, HDMI and the newest HD audio formats via blu ray. I would get a blu ray player and try renting a disc or two from RedBox or Netflix, they really are worth it, especially for the audio as streamed audio is not that great.

Your speakers seem good, if you like them then no need to upgrade. I would use the rest of the moneys to get a new TV. What TV is a way bigger question than I am ready to answer, though i belong to team plasma so I would say go that way.

Just to be clear, which WDTV Live do you have? The one that needs a wifi dongle and smaller remote, or the newer one with the bigger remote that has wifi built in?

I have two different media players (a Patriot box office, and a WDTV Live). The WDTV Live has the built in wifi. If I recall correctly from the Live manual, the factory setting for audio out is supposed to be via composite. I say supposed to be, because when I bought my WDTV (it was refurb'ed) for some reason it was set to HDMI in the menu. Check to make sure the audio out on yours is in fact set to composite and not HDMI.

When you get a new AV receiver that has all the extra goodies, make sure to set the WDTV to HDMI, and then set the audio out for whatever format your receiver uses.
Edited by Sindy Ahh - 10/2/12 at 9:42pm

$3K. Easily puts you into a modern receiver like the Dennon mentioned above and if this is a dedicated home theater, you need to go with a projector

You can easily do this for $3K. I would look into the Optoma HD33, Acer BD9500, and BenQ W7000 projectors. A whole package (projector, screen, mount, cables, etc) would be roughly $1700-1800 with the Optoma. The BenQ. which is the projector I recommend, would be $2300-2400 for the package (pj, screen, mount, cables, etc):
http://www.visualapex.com/projector-package-deals/BenQ-projector-packages.asp?for-the=W7000

Definitely the way to go for your money.