The most straightforward setup that would still get you where you want to be would be to trade up the Krell to one of their newer ones that have the analog pass-through. Then you could buy a dedicated CDP and use it's analog outs. This is what I did in your same situation, actually with very similar or identical gear. I want the best sound I can get, but I don't want multiple equipment racks or something the rest of the family can't figure out how to watch a movie on.
To really streamline while still getting awesome sound, do the above upgrade and replace the Pioneer with a Muse Model 9 Signature DVD player. It is a phenomenal CD player, an exceptional DVD player (progressive scan output, plays CDRs and MP3s), and can be had very reasonably on the used market. This, again, was my approach and I'm very satisfied with the results. -Kirk