I currently have a 6.1 Onkyo receiver that can't handle lossless audio or any of the new HD codecs. If I upgrade to a 7.1 receiver that can handle HD audio, can I use my existing speakers and sub with the new receiver and just add a 7th speaker (especially if I buy another Onkyo receiver)? Thanks.

Shouldn't be a problem............

You know about the 5.1 analog inputs, right?
Does your receiver have them? If so, and you get a blu ray player with the 5.1/7.1 analog outputs (decodes HD audio formats internally), you can use the analog connections to get HD audio from Blu ray movies. Don't think you can get the dtsHD MA, but can probably get Dolby TrueHD.

The bigger question is what speakers do you have? IMO you really need quality speakers to really increase the over all sound quality by going lossless.

OK, let me try that again; Unless you have really nice speakers, you would have a bigger impact in overall sound quality by upgrading your speakers then by by going lossless.

Agreed, it is funny to see this coming full circle again.

When the first dvd players started coming out, some speaker companies started marketing their speakers as being "digital" or "digital ready" which could not be further from the truth.

A quality speaker can reproduce whatever is thrown at it with proper power and connections.

Without knowing what speakers you own, it is hard to give any futher advice.

Thanks, but the PS3 is my current Blu-ray player, so that option is out.

My receiver is the Onkyo HT-R520. The speakers are Onkyo SKF-520, and they're labeled 130 watts max power and impedance 8 (ohms?).

Upgrading your speakers would give you vastly improved sound. Much more so then just going lossless...

Personally I'd do the speakers first, then later, if you still want, go lossless.

What would you recommend? Are we talking brand, more power, etc.?

Agreed.

Speakers do not have "power" amplifiers do.

If there are any good specialty retailers in your area I suggest a visit there to listen to some speakers. Bring some material that you are familiar with.

Some of the good entry level brands are Boston Acoustics, Polk, Paradigm, Definitive Technologies and B&W.

Brian has thrown out many of the "usual suspects" when it comes to quality speakers. I'd also recommend:

KEF
Celestion (tho harder to find now)
Mirage
NHT
SVS (I have actually never heard, but would like to. But I can still recommend based on the quality of their subs)
Klipsch

IMO, speakers are one of the most interesting piece of equipment. You must go listen. There are some really nice speakers out there. And regardless of cost, there are some you are going to like and some you are not. You just have to listen.

And all of them sound different!

So you have to check which one is much your taste.

I have Definitive Technologies and can tell you they are very good for Home Theater. What I have is not for audiophiles and a real discerning listener, however for movies, even music video, they sound great and are reasonably priced in their class.

See now, I never liked them for HT. Or any other bipolar speakers. So it's personal taste, too.

FYI, most 7.1 receivers can be used with 5.1 or 6.1 setups. (And many support any [logical] combination of speakers) You can keep your 6.1 setup for a while so long as the receiver knows that's your setup, you'll be fine.