Help to upgrade my surround processor

Here's the short version. I have a TV with composite and S-video inputs only. I also have an old (at least 15 years) Onkyo ED-301 Dolby Digital SP. I only watch a movie a week. My sources are DVD and Laser. I can't change my TV as yet, so the S-Video is OK. But I imagine the chip in my unit (motorola 24 bit dsp 56009) is basically a dinosaur. How can I get some better sound and upgrade? I imagine I just can't upgrade my chip. Sound is my primary consideration. My problem is that I hate to buy an Anthem AVM 20 which is a 8-9 year old unit and the newer Anthems are too pricey. Does the v2 2.21 upgrade sound good enough compared to today's chips? Otherwise Rotel, Sherwood, Outlaw or maybe a Cary 6? Thanks in advance for any help.
Check out a used Classe SSP-300 (if you only need single-ended) or SSP-600 (if you have balanced inputs and/or outputs). The sound on this processor is amazing. Have you considered upgrading your TV first to get 720p/1080i/1080p input capabilities via component, DVI-D and/or HDMI? It seems like staying with a monitor that only allows S-Video and Composite and upgrading sound-only may be a path worth considering alternatives 2 cents. The SSP-300 and SSP-600 have all the video transcoding you would want for your current setup (no HDMI). The new SSP-800 (not available used as yet) has even more for the future. I've owned the SSP-600 and loving the units video passthrough and both HT and balanced bypass audio quality very much.
You should considered Proceed AVP-S for now. Great with 2-channel music too, will beat out all other companies you mentioned.You can always upgrade to AVP2 later on if you like the sounds, and I'm pretty sure you will.
The AVM-20 is not going to be 9 years old most likely. It will also crush most other pre-amps sonically, especially an old Onkyo. Check out a B&K or Sunfire also. The budget solution is Outlaw.
Very good responses. The Classe is out of my price range. I like the proceed. Nguyen when you say upgrade to a avp2, do you mean buy an avp2 or can the avp s be upgraded? Looks like my best bets are the proceed, anthem or sunfire.
If you are looking at the Sunfire, you may wish to consider two derivative designs that many people speak very highly of namely the Emotiva (2 models) and the Sherbourn PT-7010a. The Sherbourn is definitely a refinement on the original Sunfire design and downstream variants and has very good sound as well as balanced XLR and single-ended output options. It does all the video transcoding you need and has an external HDMI switcher to help future-proof your investment. I owned one for about a year and a half and the build quality is extremely good as is the sound, DSP capabilities, etc....It has full 7.1 outputs along with two 'stereo side' outputs that can be allocated to a second zone or to 9.1 HT use if memory serves. There are two 7010a's posted on Audiogon in the $799 price range now.
Drj -

The big driver of DSP design is new audio formats. I know this is an obvious thing to say but laser hasn't changed for a very long time. And an older DVD unit is probably only doing the basic Dolby ProLogic format.

(The one thing you didn't mention is whether you are running two channel or surround...)

Which gets to what you can realistically achieve with your current audio video set-up which is now 3-4 generations back. (Obviously straight two channel is a different thing....)

A cost effective suggestion that may or may not satisfy your buyers lust, would be to look for an older top of the line Denon, Marantz or Nakamichi. There is not much of a market for these anymore but they still do what they do very well - and IMHO no one builds that kind of gear like the Japanese. You'll find them on ebay, Craigs List and sometimes here and on Videogon. Save your pfennings for a new rig.

You will gain a noticeable incremental improvement by going through and cleaning all of your interconnects with Caig, and upgrading your S cables with new ones from Blue Jean.

I highly recommend using a Monster PowerBar or APC H type AV power conditioner to plug the system into. This will visibly improve your picture, will probably improve the sound and can be used as the cornerstone of a new rig as it evolves.

In short, go for the low hanging fruit until you can make a significant move.
Actually I am one of those heretics who believe you can run music and surround if you know how to "separate" (get it?) them. Amps are Quickie V4's and a Sonogy Black Knight powering my Sforzando JL1's (satellites and bass units respectively with a modded Marschand Xover). The center and surrounds go through the Onkyo and a Carver 5 channel amp. I never turn on the Onkyo/Carver combo unless I am in for a surround session. I do have a TT, CD Player, Laser and DVD for sources. My TV is a 10 yr old Mitsubishi 31 inch model.

I basically want a more up to date model for DD and DTS and 24/96 sound (PCM) with at least S video. I do appreciate component outputs and the improvement they provide, but my TV does not comply.
If your primary goal is movie, then AVP-S is as good or better than most Processors out there within that price. When you're music first movies second, then AVP2 makes perfect sense.Proceed is no longer doing upgrades from AVP to AVP2, you can buy used AVP2 out there for reasonable price.Hope this will help you achieved your goal.
Doc -

good fun and nice solution - all I'm suggesting is that there is nothing to invest in - it's all a lateral move - I had a Mits 35 CRT - lovely blacks to be sure - use the degauss function based on your compass orientation - makes a difference -

BUT once you see 1080 you won't care anymore - and you'll want to upgrade the rest of the system too

you can buy HDMI sources for a few hundred bux each

keep your speakers and your TT. add an Oppo - let it decode everything and run analog out - you don't need a new processor to do that

why screw around with a dead end???