For bedroom you could pretty easily get away with one of the mini 5.1 systems, I'd think. Those are pretty doable for $500, leaving money for a bluray player. I'd check videogon for recommendations.
Ok, so let me get this straight:
You paid $900 for a very old dac, and now you want to replace the dac part of it since it's bad. No chance you can just return it?
I should also say that at this point, I also wouldn't pay extra for bluray yet. I'd take the extra cost of the bluray player, and put it towards better speakers. The bluray players will only get cheaper, and better.
You're probably better off going 2.1 for home theater for bang for the buck. Add surround as you can afford it, but you'll do better maximizing your money on the front 2 to begin with.
given that space is the last thing I look for in headphones, it's not surprising that I didn't find that out about the 701s...when I want space, I tend to listen to speakers.
I thought the 701s were technically good, but uninvolving. It doesn't do anything partciularly wrong (except bass response), but it just doesn't do anything particularly well, either.