Over many years as an audiophile, it's been clear that you seldom can get the system you want in one fell swoop due to budget considerations. So, yes gradual improvement is the way to go.
Starting with better side surrounds seems like it would be the best place to start, but they can be smaller than your mains and not full range. You want something with at least an 80 Hz bass cutoff, perferably 60 Hz or below. Stick with the same manufacturer as your mains, if you can. I would give upgrades to the back surrounds lowest prioity even to the things below. SACD does not even use the back channels. Even there, they do not add much on 7.1 Blu-rays, so I would not waste money there.
An Oppo 970 was my starting point in Mch, as well. You will find a used BDP-83 or a new 93 to sound a whole lot better. That will likely be fairly dramatic and easily worth the $500 for a 93.
As budget permits, I would upgrade your AVR to a Denon, Integra, Onkyo or Marantz with at least Audyssey MultEQ XT. That will likely bring another big improvement. My neighbor got a Denon for $650 with Audyssey MultEQ XT, and she is quite happy with it. At around $2,000, you can get a Denon, Onkyo or Integra with Audyssey XT/32, which will be even more refined sounding and offer more power and other features.
I also think you can get a decent entry-level sub for $500 or so, if that is a concern. Audyssey will tweak and level out the sound of the sub, as long as it has the power handling you need. Something with more gusto might take more $$. But, I would try Audyssey with what you have got before considering a sub upgrade.
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