How many of you guys use a HT processor ?

Yeah unfortunately you can't ultimately expect world class sonics by simply using an HT pre/pro connected digitally from a source!...thus using the DAC's in your pre/pro. You will get better refinement by finding a very good CD source that has good DAC's, and thus sounds good from it's analog out's, connected to a good high quality 2 channel preamp!(or maybe soon/future, a good 5.1 or better SACD/DVDA player, with outputs into a 5.1 or better high quality high end analag preamp I presume!).
I've done it both way's with just about every kind of system imaginable, right up to the very pinnacle of gear sellections($60k speakers, $40k amp's, $12k av pre/pro's, $15k digital sources, multi $k connections, etc, etc, etc.).
Don't get me wrong...while digital processors in these AV pre/pro's have come ALONG WAY, especially for 16 bit cd playback or HDCD, etc., and they still better the sound of older CD player processing, they can't compete overall in refinement by doing what I mentioned earlier!
The analog or digital preamp sections in these AV pre/pro's just doesn't quite offer the goods compared to what's capable ultimately...at least not yet.
However, that said, many will find using a good AV pre/pro as a preamp, either digitally or from analog connections, more than satisfactory!...and it can sound good...don't get me wrong. You gotta judge for yourself.
But I've done it both ways, with passives, actives, pre/pro's only, etc, and the CD source into a good preamp is still the purist. However, there is not bass managment or Digital EQ's or anything that can be utiliazed that way if you need it...which are really the only downside there.
As for passive preamp choices, I think that argument/topic has been more than covered a bagillion times

I would like to add one Caveat to the mix here pertaining to this topic, and that's the issue of flexibility (which offers some advantages sonically) that AV pre/pro's offer, that 2 ch pre's don't...
...I have noticed however that there are at least a couple of major advantages that using a high end digital AV pre/pro can offer a music listner. And even though most of us, including myself, conceed that even though we mostly like the sonic purity of a 2 channel pre from a good source, there are some drawbacks there. The main deal being that I find most home audiophile systems are rather dynamically challenged! Using the bass management in a high end AV pre/pro(considering digital connnetion) can let you configure your speakers as "small" Or "smaller", thus allowing you to get an ACTive subwoofer(s) into the mix! If you can dial in and properly integrate subs to do the "dirty work", you will extend the dynamic range/ability of most any home audio sytem!
Basically, most passive audiphile rigs suffer from dynamic transparancy. Using powerd bass woofer helps put dynamics into the system, and lets your amp simply drive the upper bass and above...effectively "actively bi-amping" your system(almost).
What eI've noticed over my 20 years around high end audio, is just that...most audiophile rigs can't kick out the goods like a good active system or pro audio system offers(with exceptions being the likes of ATC's, Avantgarde's, Powered speaker systems, etc). In that case, if your music listening preffernce is techo, hip-hop, hard rock, heavy dynamic stuff and similar, then the AV pre/pro offeres some advantages! But for the average audiophile(and this is the truth), who only listens to occasional Steely Dan, Miles Davis, Dianna Krall(ick!) or smooth jazz and light classical, the 2 channel is the most pure. If you like to rock, then with most passive speaker systems, doing bass managment from an AV pre/pro offeres some tremendous advantages!...if you can use a well integrated woofer set up.
The deal there is however that, in ultimate terms of coherency, integration, and proper set up(but then most can't even set up their speakers optimally anyway), many can't get subwoofers set up so well as to give a turely audiophile experience!...thus many auidophiles dislike, even hate subwoofers! But, if you can setn it up right, there's tremendous potential there, to the skilled/experienced person.
Anyway, I just thought I'd add that, incase you were like some who do more heavy dynamic music listening!
For those of you who do, the absolute worst option is a passive sysetm!..dynamics are heavily challenged there!
Hope this helps

Ever since I got the Classe SSP75 I no longer needed the messive number of boxes in my living room including the Pacific Microsonics Model II.

Besides the pre and the DACs, you also get bass management wich will allow you a lot more flexibility on speaker choice and room placement...

Plus EQ in most nowadays, useful if you have a bad room...

I used a Theta Casa Nova for several years as my preamp/DAC/processor. The sound while it wasn't bad per say, I improved my sound by a huge margin when I added a 2 channel tube preamp from Granite and relagated the Theta to HT duties only.

It actually shocked me just how big of improvement it was, becausein order to finance the move I had to downgrade my digital source a bit, but that just didn't matter compared to getting the processor out of the music chain.