I have never been into hi-fi so a question for you buffs out there. Is there a cross over point where the acoustics of a typical house offest the increase in quality of a decent system. What I mean is, if you don't have the acoustics will a mega expensive system sound better than just an expensive one, all else being equal?
Within the same room, it is very easy to make a very good (expensive) system sound terrible and a fairly modest system sound very enjoyable.
The positioning of a loudspeaker and it's interaction with the environment within a given space can have dramatic effect on it's performance - and we can often be talking about moving a loudspeaker a matter of a few centimetres in one direction or another.
Of course, some rooms have terrible acoustics from the off - lots of hard surfaces and so on and you can struggle to get anything to come together. But, soft furnishings, especially rugs, can help with the situation dramatically.
In short, if you have a rubbish room, a better system and better positioning is going to sound better than a lower end system, even well positioned; but ultimately that may not be enough without altering the characteristics of that space. As I said at the start though, it is possible to make a fairly modest setup sound very rewarding if you spend time on it compared to just plonking a higher end system willy-nilly in the room.