Left Right Center & Sub Home Theater Suggestions

You are right that your budget is tight to actually get the improvements you are need. The BIC will probably not be a step up from the Pinnacles except maybe be able to play louder.
I would suggest these for L/R fronts
http/www.amazon.com/Pioneer-SP-FS52-LR-Designed-standing-Loudspeaker/dp/B008NCD2S4
and the matching center. Of the subs in your range the Polk is probably the best but it might be better to wait until you can get something better. You don't like boomy bass and most budget subs are pretty bad this way. A Paradigm like this one:
http/www.paradigm.com/products-current/type=subwoofer/model=pdr-100/page=overview
will be tighter and play notes rather than just thud. Might not play loud enough for your room.
You might be able to find a used Paradigm. You might also move the sub to a different location. Place the sub where you sit and walk around the room to the possible locations you can put it. The location that sounds best to you is where the sub should go. If the sub has ports then you can try plugging the port with foam to help remove some boom.

The left, right and centre still cost $1000 and you want better for $500 i don't understand how!? The price suggests they are still quality speakers, i would save up more money to get better!

Woo! It's Chuck Finley! Love the name

First, skip the Polk and Klipsch subs, they aren't worth getting at all and you can do better than the BIC speakers.

I'll work around with both budgets...around $800-$1000 and give several options to look at.

First for subs:

Mordaunt Short Aviano 7 $288

NXG NX-BAS-500 ~$250

These two are probably some of the best sub $300 subs out there. Currently the NXG is out of stock and unfortunately I don't think anyone knows when it'll be restocked but if you're in no hurry, it's something to look at.

Right now, Outlaw has a sale going on on their subs, the LFM-1 Plus is sitting at $449 w/ free ground shipping ($171 off). This is a heck of a deal and probably the one I'll suggest you get, down side is that the sale is probably just through Monday so it would be a quick decision.
http/www.outlawaudio.com/products/lfm1plus.html
https/www.outlawaudio.com/mofcart/blackfriday2014.html

HSU subs:
VTF-1 MK2 at $459 though currently on sale to $399

There's also SVS:
PB-1000 at $500
and if the PB, outlaw, and HSU subs are too large, there's the
SB-1000 for $500 too

I seriously suggest you look at the Outlaw, HSU, and SVS subs instead of going for the lesser priced subs. They are much more capable and also more accurate. As with any sub, placement is critical, but it'll be easier to get a smoother bass response them. The thing with bass frequencies is that they "see" all the open space and try to fill it which is different than mid to high where listening distance matters. This is why I'm suggesting these subs, depending on how much open space you have you should probably use larger and multiple subs, but this is a good place to start.

Out of these, the Outlaw would be the clear choice with the sale. It sounds like you have the room since you mentioned this is in an open basement. After that it'd be the PB-1000 then HSU, with the SB-1000 only if you simply need a small form factor.

For speakers I'm not familiar with the Pinnacle speakers, but if they are similar to the the Sony SS's, we can do better.
However, if your main complaint is a problem is clarity in the dialog, perhaps there is an acoustical problem going on (though it could very well be the speaker). If you can, can you provide a picture of you setup? Or at least describe where the center is located and surrounding items in good detail?

I have to get going here for alittle bit, but I should be back today to give a list of speaker suggestions.

Hey, got kidnapped to help the parents decorate these past couple of days.

First the center, looking at the pictures I don't see anything that stands out as problematic. Heh, a lot of black with the center and console it's hard to tell on the picture, but make sure the face of the center sits just past the edge of the glass. If it's sitting back you'll have some reflections off the glass that will degrade the sound some, but it's probably just not a great center.

I forgot to ask this before, but did you use YPAO in you setup? Also, are your speakers set to small and what is the crossover set at?

L/R inputs is for when you don't have a dedicated line out for sub, so if you have a stereo pre-amp, you'd split the left and right singles so that it goes to both the sub, and amp that drives you mains.

The pioneer isn't as good as the Klipsch and I still recommend one of the subs I mentioned above. But for right now, play with the Klipsch some since you have it. Sub placement is critical, due to the nature of lower frequencies you'll have the Allison effect and boundary effect in play now. Without spending a few paragraphs describing them, I'll simply say that you're walls will give a boost to certain frequencies and cancellation to others in different amounts depending on the position of the listener in the room. It's most likely contributing to the boominess you're hearing in your old sub and the Klipsch.

So, what to do with it. The easiest way to pick a good spot is to do the "subwoofer crawl". What it amounts to is putting the sub in the main sitting position at ear level, put on some good material with some deep bass (music is usually best) that you are familiar with, then you get on the floor and crawl around the room with you ears at the sub level to see where it sounds best.

If there's no clear spot or if it's in an unreasonable place, mark off a few spots where it sounded good then place the sub it each and see which one will give you the best results. Put the sub in each spot and angle it towards the listening position, play around with placement alittle, adjusting it a few inches here and there and also the angle. Keep in mind that this spot is for the main listening position, you'll want to listen in the other seats to for the final placement, you may have to sacrifice a little bit of quality at the main seat to give a better overall sound throughout the listening area.

https/www.youtube.com/watch?v=R4o13mNmlaA

If you don't mind me asking, the Klipsch is a $450 sub, putting the price in line with the suggestions I made, how much did you get it for? And unfortunately I don't really know anything about the M&K Sub btw.

As for speakers, I'm not quite sure yet depends on what the budget is, but more importantly I think space for the center might be an issue. What's the max height on the center? With the plasma there it looks like about 7-8 inches, are you able to raise it a little?