Best processor that is excellent for 2 Ch music

Actually, I'm really refering MAINLY to DD/DTS decoded 5.1 material. As for pcm material output from the analog out's of a good dvd player, that's another story entirely!...to a point.
Yes, often using a good dvd player into a 2 channel preamp and such is going to yeild better results for that application. Infact, my old Panasonic DVDA310 has superb 2 channel pcm and 24/96 resolution output from it's analog out's! However, going from my 5.1 channel out's into just about any pre/pro or preamp setup I know of, for processing DVD movies (DD/DTS material), has NEVER YIELDED anything but flat dynamics and lackluster overall 2 dimmensional sound! I have found this to be the case with every dvd player setup! Probably has to do with a number of factors. Basically, my setup's are digital-in from the DVD player for DD/DTS and PCM some times, and analog in for 2 channel pcm, depending.
I say depending because many of my setup's require bass managment and or "EQ'ing" for best sound, which means running full range from analog inputs (without something like an Outlaw ICBM) often leaves me with compromises in bass management and/or (sometimes, depending) equalization!
There's always compromises one way or another.

About the EAD gear used for 2 channel.I totally agree.
The Theatre Vision DVD player when used as a cdp is ok when you use the analog outs.It is really transformed into a different player when you run from its digital out(I use Harmonic Tech Magic one 1.5 m)into the Ead 5.1 processor.
I always marvelled at how good the sound was at the end of rented DVDs.I tried the dvd player. the processor and the EAD 500 amp with my CLS speakers and couldn't be happier with my 2 channel sound.Oh I bought a cheap Yami for the HT.Smooth, yet detailed sound,very musical.

Another vote for the used Sunfire Theater grand ....would be excellent in your price range. RCA and xlr connections, phono preamp and a nice tuner....if you've got good electronics to go with it, you'll be quite pleased.

I also have to say Arcam. I did a ton of research when I wanted to buy seperates. I thought I was sold on a pair of Anthem seperates (6K for the pair)... then I heard the AVR300. What was shocking was the analogue bypass. As soon as I engaged it, (or disengaged it hahaaa), I was shocked by the sound. I am not the one to say, this is better than that, or this will blow away that... but it DEFINIATELY competed with the MUCH more expensive Anthem seperates, and actually perfered it in everyway. Even the store owner said he would show me a pair of 13K seperates, and also thought that it might be a "bit" better... but nothing to go running at over the AVR300.