The choice to use analog or digital has nothing to do with CD's being digitally recorded, or the number of channels. It's all about the digital-to-analog conversion. Sooner or later the info becomes analog in the chain, the better the DAC, the better the sound. If your CD player's DAC is better than your receiver/processor/pre-amp's DAC, use the analog, if the receiver's DAC is better, use digital...

Be careful with speaker power ratings. Most speakers wil reach their maximum output at much less than the rated wattage because they run out of excursion (and in some cases can suffer a melt-down)...I'm not aware of any rules of thumb, but I have a pair of speakers I built that would claim 120 watts, but reach their mechanical limits at 9 watts below 50 Hz!!!

Your marantz receiver is a good start. As others have mentioned, room acoustics and speakers will introduce the most improvement in the majority of systems...what kind of speakers do you have?