Starting out. - need your counsel

I need a preamp/processor to tie a family video system together.

At this point I have a TV, a DVD/SACD player, a VCR, several stereo and mono amps, plenty of interconnects, several small speakers, and a JANIS subwoofer/amp. I also have digital cable as a source. (I have no desire to play music on this system, only video stuff. I have an adequate audiophile system in my music room.) Our family room is rather small, 15x20' or so. No loud music. I don't know anything about Dolby or DTS or any of that stuff.

IS there an inexpensive option for me? I can buy new or used, but would rather buy used or deep discount here on A'gon. However, I would like as transparent a system as possible with a remote - the two channel has spoiled us vs. the junk that passes as theatre that screeches. I also will not tolerate ground loops and such. The power to the room is dedicated.
DTS, DD are pretty much standard on anything you will buy (the two formats are not compatible, but as I said, anything your going to buy these days will decode the 2) and THX EX 2 is the new kid on the block. THX EX gives you a rear center channel, it is not recorded as a dedicated channel, more like a matrix surround from the days of Pro Logic's rear channel...I was excited to hear the new wonder format, but found it not as cool as it was made out to be (just not that noticable as I had hoped it to be, however I was spoiled by Logic 7 from Lexicon which does a great 7 channel surround). With that in mind, plus you say you have a SACD player (I assume its SACD Multi Channel) I would recommend Lexicon (only the MC12 does SACD Multi, and is expen$ive), Bryston, Anthem, or Proceed. There are many others I'm sure you'll hear about but the ones I mention will certainly get you started. They range from rounghly $10K-3K new. If you want cheaper, and don't care about the SACD Multi channel, or mind analoge signals being converted to digital for processing, then back to analoge, I'd say look at Lexicon MC1 or DC2. Lexicon make great HT stuff.

Have fun;)
(Why would a preamp unit take a high quality multichannel SACD or DVD sourced analog signal and reconvert it into digital, and then again into analog? That make no sense.)

I really don't want to play SACDs on this theatre rig. Just movies. Tapes and DVDs. I know that there are video or digital outs on the DVD player, is that how I would connect it to the pre/processor?

What do these units do with DVD video soundtracks? Can't I get something under $500?
Another good source for inexpensive Dolby Digital would be to use a receiver as your source. Most of these have 5.1 channel pass-throughs that remain unprocessed in the digital domain. I would recommend you look at the Outlaw Audio 1050 receiver. You can get one new for $500 from there website or sometimes find used ones for $350-400.
The cheapest pre's that I have seen used are the Harman Kardan Signature 2.0 ($450 at ebay or audiogon but they all come from the sony tae-9000 (I think is the number also comes from ubid originally then to ebay and audiogon $700), and the Legacy Audio (is a proton) pre-amp that was selling on ebay for $275. I use a Denon 2801 as my pre (with rotel amps) and am happy with it until I can afford a dedicated system. Another idea would be to look for a older rotel pre that has a 25 pin connector and connect it to a rotel dolby digital decoder (about $500 for this but the goods are a little older). If you are concerned about ground loops then I would recommend the monster series of power centres hts 2000 or 2500. They can be had for 110-170 on ebay and they eliminated the cable ground loop in my system (this was the only product that would do it as I had cable that was not installed properly).

A simple reciever with analog by pass sounds good. Will most recievers allow you to run separate amps through line output?
I didn't design the Lexicon, just used it...then sold it when i decided HT was a silly market and has way too many things to work out before I spend $$$ on it's gear. I have since sold the Lexicon for SF Line 1, and am happy as a pig in sh*t.
As long as the receivers have 5.1 out (most modern mid-priced receivers do) then they should work fine. You can also try for refurbished marantz products at pretty good prices.

I recently upgraded my surround sound/HT system by replacing a Yamaha RX-V995 Receiver used as a preamp only and would recommend that particular unit highly as an affordable means to 5.1 processing. It's no longer made, but a lot of them were sold and I'm sure you could find a nice one on the used market - original retail started at 1K and declined to $800 when the replacement receiver was announced. It will decode DTS, Dolby Surround and Dolby Digital, has the 5.1 channel analog pass through, boasts remarkably good specs for the price, an analog volume control, and has 5.1 pre-outs to bypass the amplifier section of the receiver. (One of the few receivers in its class I could find that offered this feature). Also, for mass produced electronics, I have never encountered a company that builds stuff that lasts like Yamaha. I still use a turntable of theirs that I bought new in 1976. I know you said you wouldn't be using this for music, but you might want to look at the used market for some DTS music discs if you go that route. I have a few, and while not up to multichannel SACD standards, they offer a really expanded and improved music listening experience when the recordings are properly engineered. Best of luck with your search.
Thanks for your advice.
I'm going to pickup an inexpensive receiver from my local hi end dealer. Even though I buy my hi-end stereo stuff on A'gon I think new and inexpensive is the way to go in the family room - fewer headaches. If my gang uses it, I know where I can go for warranty work and even a loaner! He tells me that a new crop are about to come in that meet my needs. And he concurs with the advice I got here.
Try the Harman Kardon line of A/V receivers. I have the AVR7000 which is disco. Now the 8000 is out they all have DTS which is what you should look for if they have that they have everything else.