What processor to integrate with MC 6900 amp

I would like to setup a 5.1 system with my amp, DVD 963 player, IDAT DAC and Mac amp. I was thinking for around $800 I could get a processor. Do I need dolby digital? The amplification could be a cheaper 3 channel amp for $800. Would I be better off with a 5.1 receiver. Plan on getting all used. Am unsure how to set a system up for mainly 2 channel music through the integrated and 5.1 for movies and TV. Is this possible.