Recommendation for a New HT AVR?

I have a B&K AVR 507 since '04 and it's wonderful with my B&W speakers. I just upgraded my video side of my HT last night to a 1080p 55" LED LCD and a Blu-ray player. Now I've got a problem with the audio options.

My 507 has 5.1 analog inputs as well as digital optical and coax inputs, but no HDMI. I had been connecting all my previous equipment to my 507 with the digital optical or coax. Now, the new Dolby codecs won't send 7.1 down the digital optical output, just the HDMI cable or analog outputs. I can get a slightly more expensive Blu-ray player that has 7.1 analog outputs but my 507 has only 5.1 analog inputs. So, this leads me to my question...

If I were to sell my AVR 507 for ~$1,000 and replace it with something else for around ~$1,000 (new or pre-owned), what should I look for that has HDMI inputs?

$1000 does not buy what it once did. ;-)

I would keep the B&K for now and invest in a player with internal decoding and multi-channel analog outs. A quality pre-amp and amp like what's in your B&K will go a very long way in the overall sound of your system.

If you look at the amount of movie software available that is actually mixed in 7.1 discreet it's very minimal. Heck, the Dolby Digital EX and DTS-ES 6.1 formats have been out for years and there's still only a small percentage of movie soundtracks that actually use it. Even many Blu-ray titles still use regular Dolby Digital! Remember: Dolby True-HD and DTS-master audio are just nice options, NOT a requirement of the new Blu-ray format.

If you have your surrounds placed correctly and calibrated properly in your system I should think 5.1 will still sound great with Blu-Ray. Just my $.02 :-)
My experience owning and selling lots of audio/video equip since the early 90's is that you, of course, can always wait. That's the nice thing. If it were my money, I'd be looking to do an av-pre/amp combo, and trying to get it into that price catagory (patience will pay off if are a prudent/patient all apears, eventually).
One thing I've found as pretty tried and true over the years, and personally having owned and sold lots of av pre's, multi and 2 channel amp combo's, as well as av receivers, is that separates offers some very strong performance advantages over an av receiver. I think this should be at least considered.
That said, the Emotiva UMC-1 pre-pro "should" be coming out here soon (although I have concern with them continuing to push the date of release back), being released at $699 - touting all the current audio/video goodies, mostly. Combing something like this with even a used 5/6/7 ch multi-channel amp on the used market - to be had as low as $300-$500 price range, if you shop a while - and you'll have a dynamite potential combo of av performance from a separates based system! It's a consideration, anyway.
Another route is to look at some otherwise good AV receivers in the $600-700 price range, with all the current tech's, and then add an outboard amp - to at least the front mains/center! Something from Harmon kardon or Denon in this range should do you well enough, mated with good amplification for the fronts (at least) - allowing the backs/sides to be run from the receiver - should yield you at least as good to better results sonically, if not video wise (with video upscaling potentially) as an upgrade.
Basically, I put no solid weight regarding perforamance of when it comes to audio quality from ANY receiver unit, compared to separates! But that's my experience.
I would say that, easily, to get the kind of performance you like out of your current B&k, you'll have to spend lots more on a current receiver offering, and pay a premium. I think you can get better, yes, by doing the separates.
Never-the-less, I say never get married to any piece of audio/video equipment! It's all for sale eventually, rarely (if ever) holds it's value over time, and is often replaced down the pike with the newest latest advancement - for cheaper!
Good luck
Thank you everyone for your input. I've got some things to check out on my current Blu-ray player to see if I can get any more performance out of it. If not, I think I'll go the Blu-ray player upgrade path to one that has the 7.1 analog outputs. It's the least expensive option and makes the most sense given John's point about most movies are still using 5.1 after all these years.

My speakers are calibrated using the Avia disk. They are placed as good as my room architecture and my WAF (in this case it's me) will allow.

The Blu-ray player that I just got was a freebie that came with the purchase of the big-bucks TV. I think I'll sell it and use the proceeds to buy the upgraded model. This way I keep my AVR 507 (which I love) and get the use of more of my B&W speakers.
The $1K Integra AVR is a very nice piece. I'm not really picky about the movie room (my wife's domain) but I recently installed this unit and can report that -IMHO- Audyssey EQ alone justifies the price tag. As always, YMMV.

I really like my onkyo 906. I use it with a 7.1 sonus faber setup and it sounds great. No problems powering them too earbleeding levels without distorting a bit. As far as hdmi, not only is it convenient to just hook up one wire but the real reason to get it is the new surround sound formats like dolby true hd and dts hd master. The sound is like sacd compared to a cd and most of these use all of the channels in a 7.1 setup.
For the record, there are a plethora of av receivers out there that will "drive" just about any speaker, even full range! The VAST difference here - comparing an av receiver (yes, even the $5k plus ones) to even modest separates, using outboard amplification - is that the separates amp most always stomps all over any amplification in a receiver full of performance compromises! And we’re talking about dynamics differences, power delivery, and so forth - not just the ability to "drive" a speaker to minimalistic dynamic control and current reserve demand!
A good analogy, for anyone who's interested in comparing even a good AV receiver with a modest separates/power amp combo, is this: Yes, your Honda civic can accelerate (eventually) up to 120mph, just like your porche turbo. The difference is that the Porche can do it with about 5x's the snap, power, acceleration, control, and torque!
So when someone tells you their Dodge Viper does 140 mph on the top end - and you're tempted to think that the speedometer on your Ford Tempo goes up to 120 mph, and you think "big deal on spending the extra cash for performance elsewhere - THINK AGAIN! It's no contest really, in terms of appreciable performance.
I always go back to the comparisons I've done with large flagship AV receivers years ago, then compared them with using an outboard 125w/ch power amp in stead of the onboard amps in the receivers. It was absolutely zero contest in terms of performance between the receiver and the amp! The amp most ALWAYS BLOWS AWAY anything the receiver can compare with it!
Make no mistake, you buy a receiver, and you sacrifice where it counts most often, and that's bottom line performance in sound quality...if that sort of thing makes any differece to you. Fer the record...
So, Iplaynaked, if I were to consider going to separates, what would you recommend I look at? I've never really researched them.

Remember, I have B&W speakers: four 805, HTM2 for the center, two SCM for the center surrounds, and an SVS Ultra for the sub. From B&W's website: "Recommended Amplifier Power 50W - 120W into 8Ω on unclipped programme".
You could easily hang on to see if Emotiva releases that UMC-1 for $699 (loaded 7.1 wiht HDMI, EQ, HD video upscaling, and HD audio codecs), then add an amp - either from them or used multi-channel for not much north of $1k, total! This is probably your best bet, even though you'll be spending over $1300 for all of this new. I think it's worth it, as a minimum for quality speakers like you're using. That's my recommmendation for best bang for buck for your setup, potentially, with all the latest processing.
The other route is buying a current av receiver, with otherwise good quality sound (Like the Harmon Kardon AVR354/254, with latest 7.1 everything), and add an amp.
Traditionally, however, separates AV pre's have typically offered a bit better potential sound, if better dynamics, usually. But, I've had good results here with Yamaha and HK receivers, used as pre/pro's from their pre-out's.
Still, for $699, I'd wait to see what you can get with the Emotiva, and wait a few weeks or so.
For the record, in response to your comments on B&W recommending a "minimum" of 50-150 watts amplification, those are just that, minimums. It's a kin to saying you should use a minimum of 87 octane gas in your car. It will perform much better with higher octane!
Especially when you consider that typical modest sensitivity passive speakers (like your 805's at, what 88db?) need all the dynamic help they can get, you should consider separates, running the speakers as "small" on your processor/receiver (which vastly improves dynamic capability of the system), and a good high current amplifier. If you're trying to keep everything near $1k total, you'd be restricted to used multi-channel amps on the market, and limited to what comes up in the $400 range, at best. If you can squeeze more money out, you can get a bit more amp, of course.
For the record - and I've been selling receivers for years - I'd never be spending over $1k for a "receiver", as a stand alone unit, no. Unless was some killer deal I could resell, I'd be looking for a better combo, because I know what the performance appreciation is, looking elsewhere.
You've got allot of good responses here, so I will make just two quick points.

Note: I've sold a number of AV units over the years, and have been in the unique position to do "allot" of AB testing.

Point 1. The B&K receiver in multi chanel is sonically superior to just about any of the commen brand receivers, ie, Onk/Yam/Den/Pio/JVC/etc - at any price - AB test - you will be able to tell. And is equivilent to most upper line receivers, ie Arcam/AZUR/Rotel/Anthem/Sunfire/etc. and for the negative nancy's out there who's neck hairs will raise for this brash statement - here two very good reasons why -A. B&K works directly with Dolby labs and has set the standard for Dolby 5.1/7.1 and THX. The cards in these receivers are "solid state" with "full bandwidth" signal paths and process and pass all multi-channel formats at the highest THX/Dolby standards - ALL other manufacturers - follow their lead - this is simply - the facts. B. B&K arguably uses some of the finest class A output stages in there amplifiers, with "huge" caps - and deliver considerbly more current than most other brands - current controls your speakers - tells the drivers when to go/when to stop. So - arguably, Arcam,B.C.D.E.etc brands may do this part as well, but better?

Point 2. Your B&K is upgradeable - contact B&K at there 800 number and ask - you will find that they can upgrade the software, firmware and hardware of any of there products, and offer upgrade programs well beyond there 5 year warranty period. Try getting a hold of someone in Japan for an upgrade -

Best of luck - Have fun/enjoy

Point 2.
Check out the thread "Need advice on pre/pro - Rotel1098/Outlaw990/??." I posted some links for the Onkyo Pro 885. It is the identical pre/pro as the Ingetra 9.8, which someone mentioned in a reply to your post. The unit has received flowing reviews and gets compared to much higher end gear. The big plus for me, in addition to preformance, is that it features HDMI switching (v1.3) and supports the latest audio formats. In all honesty I could do without these features today, but the fact that it has them gives me comfort going forward.

As Iplaynaked mentioned, this unit can be coupled with a reasonable 5 ch amp and you would have a great setup to drive your B&Ws. I'm not well versed on amps these days, so I cannot recommend one over another. I actually posted a question about my aging Rotel RMB-985, which I intend to pair with the 885. Assuming that a slightly used 5 ch amp, such as my Rotel, will deliver sufficient quality, you are looking at < $500 for something here on AgoN.

By the way, the 985 can be had as a refurb at for $799!

Have fun!
Sorry, I meant to say that the 885 can be had for $799!
Do not undervalue an HDMI connection. It replaces 6 multi channel audio cables for 1. It allows you a very effective way to get the latest high bit rate audio codecs for blu-ray movies, passes SACD and DVD audio, all over a single cable, plus you need it to pass 1080p video to your display.