I'll share with you what I think I know about this, but I'm sure I'm mistaken on a technical point here or there.
I think one of the differences between the premium and base sound system is that the premium system outputs digitally from the head unit while the base system is analog. I'm not sure if there is an external amp in the base system.
The base system comes with four 4" speakers in each of the doors and two 6.5" speakers under each seat. There are mounts in the doors for tweeters but no speakers in them.
One of the troubles you will have replacing the speakers (and this has been true of BMW for as long as I can remember) is how shallow the door mounts are. Most aftermarket speakers simply won't fit. There is a company which caters to BMW audio, but they haven't yet released their kit for the X5.
http://www.bavariansoundwerks.com/ca...261/0/Catalog/
Sorry, I don't have any practical advice for you regarding what's going to give you the best bang for your buck in terms of upgrades. Good luck!