I have a similar system as you. I used to have Focus 20/20s, but now use Whispers. Everything else is Legacy for surround as well as the subs. Even my source is an Upgrade Company improved DV-50. I think I have a pretty good idea how resolving your system is from my own experience.
With this in mind, I have more food for thought for you - The Krell HTS 7.1 has only one multi-channel input and it is a pass-through only with not even level adjustments. It does however do level adjustments, bass management and time alignment through the digital inputs.
Why do I mention this you might ask...?
I bring this up because although the new generation of blu-ray players has digital audio outputs [either coax or HDMI] the analog outputs are a huge improvement due to their higher resolution. My local A/V store did a demo for me with an HTS 7.1 and a blu-ray player, the difference in audio via coax and analog was gigantic [analog being the clear winner pun intended]. This improvement is much more significant than the image quality improvement yielded from the Blu-ray disk...IMO.
What surprises me the most is that the Sony BDP-S1 I have sitting on my shelf right now for demo purposes has no adjustments [level control, time alignment, and bass management] from either its digital or analog outputs. This is something that your DV-50 does have to a limited degree
at least it has level adjustments for its multi-channel outputs. For me, this player is a no-go for this and some other reasons not related to this thread.
Thus, all this adds more complication if you "want it all." Not only might you have two multi-channel sources [the DV-50 for DVD-A/SACD multi-channel audio AND a new Blu-ray and/or HD-DVD], but if you need to adjust anything with the multi-channel pre-amp, then the HTS 7.1 isn't for you from a feature standpoint.
Also, HDMI connectivity should be seriously looked at, not for video, but higher resolution audio. This is something I really dont know much about though, but could help to replace those multi-channel analog inputs for the newer sources. I believe there is a newer HDMI standard for these higher resolutions that are available with HD-DVD and Blu-ray, or will be some time in the near future.
I am sorry if I am confusing matters. It is all rather confusing even to me.