Head units: Pioneer, Harmon Kardon, Sony, there's a million of them, all are pretty good.
Speakers: Infinity, ADS, Rockford Fosgate, etc etc
A good site to see what can fit into stock openings is:
http://www.crutchfield.com/S-1yg77jbAtcl/?wm=tn1
As for louder degrading the sound: ummm no. Sorry, you're wrong about that pool. While it
can happen, it doesn't have to. If you match the input voltage, the correct speaker capabilities with the amp, a nice clear signal source, you can make it so loud you'll crack your windshield but it will be so clean you'll wet your pants.
Just a rule of thumb: volume or loudness is directly dependant on the total conal area of your speakers and their efficiency (meaning can they be driven by a low wattage amp but still accurately reproduce sound). Volume is also dependant on wattage of the amp.
If you just want a simple upgrade to get you cleaner sound, MP3 capabilities, and a little more dynamic range there are plenty of head units that should fit right into your dash and your factory speaker openings.
A real easy fix for a factory radio is to install a head unit that has a mosfet amp built in that puts out about 50 watts per channel. Then install some upgraded Boston speakers (or any other major brand for that matter) in the factory openings and you'll be amazed at the difference.
Another really good trick is to install some separate mids and tweets in your front end. These are the ones that have the mid speakers installed in your factory door locations then the tweeters mount to either your door posts (optimal location) or your dash board. This gives you better separation, imaging and staging. For even better staging (and if you don't carry many passengers in the back seat) stick to purely bass speakers on the rear parcel shelf. With this setup you could even add a separate amp to power the woofers in the back. You don't really need one for mids and tweets because they are typically so efficient they can be powered by the head unit.
If you're a hands on type there are many online places that give you step by step instructions on how to remove the various panels in order to install all the goodies. I did this with my F150 and it only took me an afternoon.
There are also many wiring adapters that hook into the new head unit and plug into the factory radio harness. There are also dash bezel kits that make the head unit look stock. It all just clips together.
One draw back from using the factory wiring harness is the fact that they cheap out on the wiring to the speakers from the dash. They typically use like 20 gauge or thinner. For optimum sound (same as your home theatre) a nice run of 16 or 14 ga. wire will help also. But I don't think you're really into that area are you?
Anyhow, go to Crutchfield, you can learn a lot there about what will fit your car.....