I still have the factory front and rear speakers in my e30, hooked upto a 4 Channel amp, makes them sound a hell of alot better.
Im not too sure how good or bad ur 320i speakers are, but if you are doing things in pieces. First upgrade the headunit.
Then upgrade to a 4 channel amp hooked upto stock speakers, and see if there is any improvement.
If ur still not satisfyied then upgrade the speakers to something after market.
I didn't know car mp3 players can play dvd-r discs? is this tru? or is he talking about a dvd player.