This is the example I've used in the past to describe how good I feel the improvements are in the SP-1.7 over the SP-1.
When my SP-1.7 was an SP-1, I used my $700 CDN Sony DVD (DVP-700NS) player for movies. and my approx $900 CDN Rotel CD (RCD-971) player for two-channel music in bypass mode. The Sony DVD player in digital mode for two-channel music could not compare to the Rotel in bypass mode.
Now that my SP-1 is now an SP-1.7, I no longer use the Rotel CD player, at least not in bypass mode. After listening to my Sony DVD player in digital mode thru my SP-1.7, I went out and bought a digital interconnect for my Rotel. I now use both in digital mode. The second 2-channel source lets me play with crossover settings. In reality though, I am perfectly happy now with just my Sony DVD player for 2-channel and movies. I have PMc IB1's now (used to be B&W 604s2's) and 4B-ST's for amplification. The SP-1.7 and Sony DVD player have had no problems keeping up with the IB1's. Several times I have done direct comparisons with my Rotel CD in bypass, and the Sony DVD in stereo digital mode, and in my opinion there is no comparison (DVD is better). The Rotel CD is by no means an ultra expensive piece so there are probably better CD players that will sound better in bypass mode than my DVD player in digital mode, however I feel this example gives a good indication of the relative improvement in two channel digital sound in the SP-1.7 over the SP-1.
I doubt that I will ever buy another CD player. At the moment, I think my future upgrade route includes #1 upgrading the SP-1.7 (I don't want to start any rumours - there are no major upgrades planned !), and #2 adding the DA option to my BP-25 and pairing it with my old Rotel CD player as a transport and running it thru the SP-1.7 in bypass mode.
So I feel the cost of the SP-1 to 1.7 upgrade is easily justified by the improvements in digital stereo mode.
Since I watch a lot of movies on digital cable (2 channel, not 5.1), I found the DTS neo-6 cinema mode to be an excellent addition versus the dolby-prologic. I also found the neo6 did a better job than the prologic-ii at first. However since I upgraded to IB1's and some recent improvements by our local cable company, I'm starting to find that I prefer the prologic II. I don't use pro-logic anymore. The benefits of the improved DACs in the SP-1.7 are also reflected in the surround modes. Unfortunately I can't do the direct compare than I can do with the Rotel.
So if you have an ultra expensive CD player (that costs more than the SP-1 to 1.7 upgrade) that you use in 2-channel bypass mode, then you may or not find the upgrade costs effective. If you want to listen in surround, watch movies, and have the cash, then the SP-1 upgrade is a no-brainer, in my opinion.