Thanks. Please forgive my ignorance on amp/pre-amp/pre-processor. I only had a very little knowledge about AVRs that too were not accurate after little exploration.
Initially I thought AVRs are THE amplifiers to go with any player (DVD/CD/BDP etc.). After that I learnt that power amp is needed to improve the performance of AVR. Now, one more is added - Pre processor and I really don't know anything about it. Could you please explain (if possible in a lay man's term) me about the exact role/necessity of each of these components - AVR (!), Power Amp , Pre processor and Pre-amp? Please bear with my ignorance and for these very basic questions.
These questions have been answered many times in these forums. Let me recap them for you.
A single channel sound system has multiple stages. The first is the source. If we take an analogue system, we have players such as a TT or a tape drive that sends analogue signals out. These signals have very low strength measured in millivolts and cannot be used as such. In stage two, a pre-amplifier takes these low strength signals and processes them for stage three. This processing includes enhancing the signal strength and some filtration to 'clean' the signal so to say. A pre-amplifier will also be able to understand the signal strength of various source devices (such as a turntable and a tape drive), differentiate between them, and process them differently. The output of a pre amplifier will vary from a few volts to as much as 10 to 15 volts depending upon the volume you set.
The processed and enhanced signal is sent to a power amplifier which is the next stage. A power amplifier is the 'dumbest' of all the stages. All it does is to take the incoming signal, and add juice to it by appending current to it. An amplifier has a fixed strength enhancing capability - what is usually referred to as gain. If you give it 2 volts as input it will output say 20 volts. If you want more output, you increase the input signal strength.
In the final stage, these signals are sent to the speaker for you to hear as sound.
This is the simplest of a sound system using a single channel analogue circuitry. In a stereo system, the complete circuitry is duplicated at each stage for two channels.
We will add a few complications to this sound system.
(1) A few years ago, again in a purely analogue system, noise cancellation or suppression methodology was added by a company called Dolby. In an analogue system, the Dolby processing is done at the source stage, so there is not much work for the pre-amplifier.
(2) Sometime ago, Philips introduced a new method of storing sound - in digital form instead of analogue form. So instead of tape drive, you now had a CD drive. The CD stores data in digital form and the CD Player had to convert the digital signals to analogue (DAC) before sending them to the pre amplifier. Some designers felt that a pre-amplifier is better suited to do the DAC, so many pre-amplifiers can accept digital signals, do a DAC first, then all the processing we discussed above.
(3) When we ventured into multichannel audio for movies, storing them in digital form was the only option. You now needed 6 channels of sound to be processed, so a surround sound processor (SSP) was born to replace the pre-amplifier. In addition, SSPs also had to undertake a new task - that of processing the video signals in addition to the audio signals. A SSP can accept coded digital signals, decode them, separate audio and video signals, do a DAC on each channel, and process each channel for further amplification.
The amplifier continues to be dumb. Now it amplifies upto 8 channels in a multi channel system as against two channels in a stereo system.
Pre amplifiers and SSP process sound in different ways. This has more to do with the final reqirement than any technology. In movies, the emphasis is on 'loudness' with a enhancement of low frequencies. Thus a SSP would focus on this and could even add a bit of distortion as the volume levels go up.
A stereo or musical pre-amplifier, on the other hand, will focus on delivery of clear and undistorted sound across the complete frequency range.
If you like music, using an AVR as a pre-processor and then amplifying it for music will not make much sense. As I said before, an amplifier is a dumb unit and all the important processing is done by the pre-amplifier or surround processor.
Cheers
) the necessary pre-outs, I would like to finalize the AVR as a first step. 
