The distortion or muddiness you're hearing is the effect of accurate speakers playing compressed MP3s on a cheap receiver. It's the curse of good equipment making up only one part of your system, where all of a sudden you're able to appreciate the mess upstream.

I had a similar problem, and a new receiver made a huge difference. If it's in your budget, a unit like the Outlaw 1050 or a Yamaha receiver will help bring your system up to snuff.