The Krell does have bass management. It doesn't have analog bass management for SACD and DVDA but neither do the others.
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From your info, it appears this will be more of a HT piece. All three of these processors will perform well with HT. I think the differences in HT will be subtle. You haven't indicated your amp selection or cd player, however.
For music listening, the Krell or Classe would be well above the B&K IMHO. The B&K is a good overall performer (& least expensive), but the Krell & Classe have a much better preamp section...very neutral, low noise, etc. I would choose the Krell or Classe based on how it mated to my amp. The amp selection will also be critical in making your 803's (matrix?) sound their best.
If memory serves correctly, the HTS2 has the analog bypass, but no DPII. I would think you can get a real good deal on this processor. If not, I would opt for lightly used HTS 7.1. The Classe is a nice piece and has received good reviews. I would choose either of these preamps over the B&K if the budget allowed.
I would also look into a used EAD processor. Great sounding and good value used. The Parasound Halo has also received good reviews and is attractively priced with a long warranty. I have not heard the Halo, but would put it on the short-list with Krell, Classe & Ead.
Thanks for your help. However, I have more questions...
You haven't indicated your amp selection or cd player, however.
You are correct. I have not decided on the amp yet.
If I go with the Classe ssp60, I'll get a Classe CA 200 for Front rt and left. Then I'll get a Classe CAV-180 for the other speakers.
If I go Krell, I'll get the Krell 3250 3channel amp.
If B&K ref 50, I'll go with the B&K 200.5 amp or the 200.7 amplifier. (200 watts by 5 or 7 channels)
Darrylhifi stated... "Do not live w/o PLII."
I don't even know what PLII is. What is PLII, and why should I want it?
Lastly, I have no Idea what kind of DVD\CD player I should get. I have heard some good things about Pioneer's elite. I just don't know what to look for in a DVD player. I do know I will want the option of playing music (SACD and the other format?) from it; but that's about all.
If cost is not a factor, I would still say Classe or Krell. I have a Krell HTS 7.1 with a Cary Cinema 5 amp. Its a great combination. I have also had the Krell HTS (original) and a Kav 250a/3 and Kav 150a. I found the Kav series amp to be fatiguing, and not comparable to Krell's larger offerings (which I like). I found the Kav series to be very dynamic with a great lower-end, but a fatiguing and bright upper-end. The Kav series amp worked better when I had the B&W 802 Matrix. They are not a good match with my current B&W 804N (IMHO). That said, I believe the newer kav line of amps 3250/2250/TAS have a more balance sound. You really need to hear it with your speakers.
The Classe amps are very nice & will mate well with B&Ws. I prefered the Cary Cinema 5 over the Cav 180. Subtle differences and a matter of preference. I am not familar with Classe's two channel amps.
I agree about DPII....much better than the original & great for regular tv viewing.
I would also suggest a separate dvd & cd player vs. a combo player if you are serious about music. More options and better values. Many low end dvd players provide nearly identical picture quality. Sound on the other hand is vastly different.
If music is a lower priority a combo player works. I would also not go with either Krell or Classe. Both of these companies excel with 2 channel music listening...great preamp sections. You can get nearly the same HT experience at much lower price points. Than the B&K makes sense. I would probably look at the parsound Halo and Anthem selections before B&K.
Either way you are looking at good products. I would focus on what you really want out of you system & get what mates well with your speakers.