If you do the power supply capacitor mods I will describe, I think the S1200 will be superior over any other multi-channel preamp/processor. And yes, you can connect XLR/RCA analog audio directly to S1200 as well. The S1200 uses fully discrete Class A analog stages (no op amps). Below is a picture of the S1200 audio board, you can see the 8 separate audio stages for each of the 7.1 channels. Each one of these would be a single opamp in another processor.
https://photos.google.com/photo/AF1QipOOZfHv-_iCrjXTkT3JayjSMG8FCYsl1DBGeygF
As far as I know, the only other processor that uses discrete Class A stages in Bryston SP3. However, the Bryston is not as good in my opinion. It is voiced differently. It has a massive main power supply with big caps. However, their analog circuits do not have any local capacitors. As a result, the sound is very laid back, but with massive bass. In the Krell board, you can see tons of local power supply capacitors for each analog stage (SMD caps). These local capacitors give the Krell enormous amounts of resolution and attack in the midrange and highs. Unfortunately, the main power supply on the Krell is undersized, which is essentially starving these Class A analog circuits. The result is weak bass and a thin/bright sound for the mids/highs.
The Krell Foundation would not require any of these mods as it has very good power supply caps. However, as far as I can tell, it uses op amps for audio stages and would not be as good as S1200. The Classe SSP-800 also uses op amps. So does McIntosh.
Below is a picture of the basic internals of S1200:
https://photos.google.com/photo/AF1QipOAbERmjfNnzPMRpWFmk_9qKW84yLNtow4FbGjA
The bottom board has 4 separate power supplies (each marked by a pair of capacitors). The top HDMI/video board also has its own power supply. On the bottom board, the first three power supplies are all shunt regulated. Power supply on the left is +5V for the ESS sabre dac VREF power supply. The two in the middle are for the +17V / -17V for the analog stages. The one on the right is for +12V (and probably +3V) for digital sections and uses conventional LM78xx regulators (not shunt). We really don’t care about the power supply on the right as it is just fine.
My mod does not replace any existing capacitors. It just adds additional caps into the mix. Below is a picture of my mod. For reference, the blue module on the bottom of the picture is the potentiometer for the front panel knob.
https://photos.google.com/photo/AF1QipOiGwC8a6DljI_Gy9hD0Dw9Rg8Q8AMVBI4yVEuJ
For the left DAC VREF power supply, I use a Nichicon KW 10,000uf 10V capacitor in parallel with a Vishay 0.1uf MPK (part BFC241641004) for stabilization. I basically solder capacitor leads directly to the board pins for the AC/DC diode converter block (which is bolted to the case floor). These are the outside pins of the 4 pins. Make sure you solder the cap polarity correctly (negative to negative polarity and so forth). Use a digital multi-meter to confirm polarity of the pins. This mods basically adds capacitance to the DC sections of this power supply.
For each of the middle two +17V/-17V power supplies, I use a Nichicon KW 15,000uf 35V in parallel to a Nichicon Muse KZ 470uf 50V in parallel with a Vishay 0.1uf MKP. The 470uf helps with the quick voltage needed for midbass punch while the big 15,000uf ensures the continues voltage required b Class A circuits is never starved and helps with strong deep bass.
In addition, I always recommend a mandatory fuse upgrade. I like Furutech rhodium fuses for the highest resolution neutral sound. If you have a very warm sounding amp/speakers, you could use a Hi-Fi Tuning Supreme to increase the attack/resolution.
You can use the S1200 as purely a 7.1 channel analog preamp if you want (using 7.1 audio from Oppo). However, the Krell is absolutely excellent when doing tv/movie decoding using dolby digital / DTS, etc. Be aware that the S1200 has had common problems with the DSP board which affects decoding of audio over HDMI (unstable audio with dolby digital, DTS-MA, loud pops when changing modes, etc.). Krell has engineered a version 2 of the DSP board which fixes all the problems, but requires you to send the unit in for replacement and new firmware. I’m not sure of the cost, however.
Using the S1200 as a DAC is not really great unless you have 24/48 over digital COAX. The digital clock in the Krell is temperature controlled and is optimized for 48khz audio (for movie soundtracks). It is absolutely excellent for this. However, if you have 44.1 or 96 or 192 audio, it’s better to use a DAC. The Krell will play high res audio over HDMI, but it is compromised. It is compressed with no dynamics (compared to COAX) and does have a shouty or blare effect on the upper midrange.