has the quality of sound improved in home CD players since the 90s ? I was wondering if it pay to upgrade to a newer CD player. I have a Kenwood CD204 now

I beleive that the CD player you have has a digital coaxial output, if you run a cable from the digital coaxial output to a digital coaxial input on a sound system the quality of the audio output would be up to the Sound system.
Compact Discs are encoded to a specification defined by the red book standard which was developed in the late 70’s and early 80’s and are recorded in a 2 channel 16 bit PCM (Pulse Code Modulation) format, the digital output on the CD player would be sending a raw PCM bitstream to the sound system which then decodes it into a 2 channel analog output. Most decent sound systems and nearly all stand alone amplifiers these days have processors like "Dolby pro logic" and "DTS Neo 6" to matrix a 2 channel input into a 5.1 channel output. I have a Harman Kardon AVR 130 amplifier (5 years old) and a sony CD player from about 1994 and the sound I get out of that is great….. its all about how its wired up