The current squad is definately good enough. Unless Liverpool spend an awful lot of money in the summer on new players we will be just as bad next season. I can not really see our players all of a sudden turn into champs.
Manager: 1st priority. A new manager and coaching staff will improve the quality of the current squad. Maybe they will even introduce some tactics and offensive/defensive formation and strategy? Capello is a good option.
Central defence: 2 new players. Main attributes in new CB's pace, pace and pace. Lucio and Thuram perhaps? ( yeah dream on..., but it would have been very nice?)
Left Back: I can not remember the last time we had a decent LB. Carragher is a good tackler, but is awful technically. Clemente Rodriguez (Boca) is my preferred option.
Midfield: Players with flair, pace and creativity. Malbranque, Guinazou and Guily good alternatives.
Striker: A big strong guy to play alongside our (relatively) small players. A player that can hold up the ball and score from crosses. Ideally this player would also be quick and technically gifted. However these players are very rare in modern football. I know of Henry and Van Nistelroy. But I must admit that I can not think of any player that Liverpool might buy in this position. Viduka is the best alternative I can think of. But I must admit that I would prefer a better player than that. Alan Smith sucks and I am not sure about Cisse either. Trezeguet maybe? All these players will be very expensive though...
Also... some of our awful players must go. Cheyrou (mickey mouse), Heskey(awful), Murphy(slow motion), Smicer(injury prone), Diao(just hopeless), Biscan(clumsy)... I do not think Liverpool will be able to get more than £ 5 mio for these players put together. Maybe we even have to pay to get rid of these guys. Owen should leave for around £ 5 mio. The reason why these guys should leave is simple. We need to build a squad of winners. Some of our players are all too happy to go for 4th spot in the league and lift a carling cup every now and then. This is because they know that they will never be good enough to play for a top side and win the league, let alone CL. These players will stand up and defend Houllier since their careers are dependent on him managing Liverpool.