Component recommendations: best bang for buck.

HT Processors:

Marantz 8802a - (if you choose this, make sure to get the 8802a model. The original 8802 does not support HDCP2.2). Based on your budget and everything you need to get (speakers, etc.), I would probably recommend this. It is an excellent internal architecture design with a very large power supply. The DAC I/V stage is op amps, but has fully discrete audio output stages. It supports all the latest standards (4K, etc.) and is the most cost effective of your selection. The sonic signature is slightly on the warm side and just a little bit laid back, but all the detail is still there. It’s typically $2500 used, but there are some new ones on ebay for around $3k.

Krell Foundation 4K - This is another excellent choice, but completely different than the Marantz. The Krell is going to have very high resolution with a lot of detail and impact (for HT it is an excellent choice, but also excellent for music). Krell is still doing updates to this product. Typically runs for about $4,000 to $5,000 used. I own the Krell S1200U, which is awesome and better than the Foundation (S1200 has fully discrete Class A audio stages where Foundation uses op amps), but the S1200 does not support 4K.

McIntosh MX122/160 - (I’m assuming you mean the 122/160 because these are the only models that support 4K). Many love the McIntosh processors. They have the "McIntosh" warm sonic signature and the front panel is just beautiful. The internal architecture is excellent. I looked at the Mac and it was on my list, but I did not want a warm sound and I was concerned about all the bugs that appear in the processors which McIntosh never fixes (just start searching in the Audio Aficionado forum). The 122/160 are going to be in the $6,000-10,000 range as well. The older 121/150 models are cheaper used, but they do not support 4K. If you wanted this type of sonic signature, I would just go with the Marantz 8802a as it is an excellent product. Marantz continues to support this model.

ARCAM - I don’t know much about them, but I have read a little bit. They seem to be excellent with a highly detailed sound and a huge amount of impact (great for home theater). You should research more if you are serious about this choice. Personally, I would probably go with the Krell unless you wanted all the extra Dolby Atmos channels. For me, a high-end 5.1 channel system is better than an average 11.1 channel system.

My one question (among many others) is would my TV/display benefit from the "additional" video processing of the AVR unit vs. plugging the HDMI directly into the TV (I have the latest 4k TV from LG)

It depends.  Sometimes the video processor in the AVR / HR Processor is better than what is in the TV.  Sometimes it is not.  Usually, there is an option to disable any "video processing" in the AVR/Processor and just "pass-through" the video.  I would not worry about this question that much.

I would not say that the Krell is "better" than the Marantz.  They are different.  The Marantz is priced lower because of economy of scale.  It has a huge retail network and will be able to sell significantly more units than the Krell Foundation because of this huge network, hence a lower price that is more accessible to people.

The Marantz is an excellent unit with excellent design.  It has a huge power supply for an HT Processor (40,000uf if I remember right, I think it was 4 x 10,000uf capacitors).  It also has a significant amount of power supply capacitors directly on the analog circuits.  That being said, it is voiced to be on the warm side (like a McIntosh in a way).

The Krell, on the other hand, is very fast, high resolution, lots of fast attack.  This is great if you want a lot of excitement during movies (action scenes, etc.).  I will say that the Krell power supply is sized decent, but not great.  This means that the Krell is not going to be as full in the sound as the Marantz (bass / midbass / midrange).

At this point, it becomes a matter of matching equipment.  If you were going after a warm/full Integrated Amp like the McIntosh MA8000, then the Krell would be a very good match to provide a little more kick for HT purposes.  The warm/full McIntosh would round out the leanness of the Krell sound.  The Krell would not match well with a very fast/detailed amp.  The sound would just be too lean/thin/bright in the end.

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Another note.  These are HT Processors we are talking about, which means they do not have built in amplifiers.  You will have to get an external amplifier to power the center/surround speakers.  This is, ultimately, the better way to go in my opinion because you are not going to get the quality of sound from a AV receiver (AVR) that you are from a good processor and amplifier combination.  This will also allow you to choose an amplifier that is very similar to the 2-channel integrated.  I believe this is very important because matching the "voice" of the front 3 speakers is most critical in HT.  If the amp is very different for center channel, you will definitely hear a change in sound when sounds pan from left to right (which happens a lot in movies).  Some companies will have a 3 or 5 channel amplifier available.

Going with the Krell Foundation option, I've read that I can either go with  a power amp or an integrated amp.  Whats the benefit of one vs. the other?

An integrated amp is just an amplifier has a "preamp" built into it.  This is, essentially, another analog stage that is meant to help shape the sound more and allow you to select from multiple sources as well as control volume.

Since you want a "hybrid" system, you would use your 2-channel integrated as the "amplifier" for the left and right speakers.  You would just connect the left/right outputs of the HT Processor to one of the source inputs of the Integrated Amp.  Some integrateds have a "HT Bypass" or "passthrough" mode that you can use for a specific source.  This will either set the volume at a static point (such as 100%) or bypass the preamp completely.  This way, the HT Processor takes over control of overall volume.  If the integrated does not have a bypass mode, you will just have to set the volume at a specific spot and make sure its the same whenever you want to watch movie/tv.

With the Krell Foundation or Marantz AV8802a, you will need a 3-channel or 5-channel amplifier to power the center/surrounds.  The 2-channel integrated will power the left/right, as I have described above.