I have one of those family rooms, with 11 ft ceilings, that attaches to the kitchen, and the breakfast room, and is open to the hallway, which is open to the dining room... You get the picture. Lots of space for bass to dissipate.

I currently have one Velodyne HGS-12. It's response is boomy and inaccurate (because of the room, I believe), so I want to make some improvements.

I am thinking of either buying another HGS-12 (around $1400), or adding two LFM-1 (obviously the less expensive solution). Heck, for the price of the HGS-12, I could be 3 LFM-1s, but that may not make sense either.

I have the funds to do either. Which do you think will give me a better sound?
I am also considering the SMS-1 to smooth out the response.

What do you "wizards" out there think will give me the best result?

The SMS-1 would almost definitely help if you're getting boomy, messy bass - a room that complex likely has some acoustical issues. A combination of an additional sub (or two if necessary) and an SMS-1 in front of it all would be a good approach.

Check the crossover settings before you do anything. It just shouldn't sound boomy unless there is too much overlap or some room resonance issues involved. If you have them yeah go for the SMS-1.

First though, do you have an SPL meter (Radio Shack) and a frequency response test disk?

http://www.genelecusa.com/ht/support/testsignal.php

Try this first, the sub you have is an excellent one.