First, let me preface by mentioning that 7.1 surround sound is intended for home theater applications only.

from HK’s web site (what they do with non-native 7.1 sources):

“HARMAN Logic 7 technology transforms a stereo input into full 7.1-channel surround sound, courtesy of proprietary algorithms that make any audio source – HDMI, analog, component, composite or computer-based audio from a USB connection – truly spectacular. The result is optimal quality and a superior, enveloping experience that engulfs you in a 360-degree soundscape.”

my translation after listening to it.  “we can turn any high quality analog signal, be it 2 ch or 5.1, do an AtoD conversion, then a DtoA conversion, both unnecessary, and guess where to put extra sound w/o having any idea of what is in the content of a movie, and make it sound like crap.”

like i said, every AVR receiver will have it’s own flavour, but they will all involve A2D and D2A conversions and there isn’t much hope that HK (or Onkyo) can sell a AVR with 7.1 channels of amplification, all those other whistles and bells, and good quality DACs at an MSRP of under $1K (of course they sell for far less than that, almost half)

even with 7.1 native sources, you are stuck with your AVR doing the DACs, rather than your Oppo which has the good ones.  personally, i’d stick with the “quality over quantity”  approach of the Oppo’s 5.1 analog signal path, even for movies.  see p. 115 for a very good quantity over quality analogy to speakers, which i’ve seen (very negatively by my taste) effect peoples purchase approach to them.  (obviously not the case here, just a good analogy)

also see p. 73, para 3: “A key feature of a high-end A/V controller is the ability to pass analog input signals to the output without converting the signal to digital and then back to analog.”  what he fails to mention is that this is the sole domain of 2 ch and 5.1 ch audio for movies…