If the 560s are still working, and you're looking for an improvement in quality, I'd say keep using the 560s, and start putting that $500 toward an actual component system. You would likely want bookshelf front speakers (or smaller) in a studio apartment, which fortunately keeps the final tally more affordable. The $500 would buy a good Denon, Onkyo, or Yamaha surround receiver along with a good pair of 2-way bookshelf speakers in the 5.25-6.5" range along with miscellaneous cables and wire. Another $300 expenditure later would get you the center channel and rear surrounds, and another $300 expenditure after that would buy a decent powered subwoofer.
He who laughs last, laughs first next time.