How does the digital bypass on home theater processor work

Thanks for the help. Let me restate what I am trying to do so I am sure that I have it correct. I am combining my existing stereo system with not yet purchased home theater system-thinking of Anthem AVM 60 or Classe Sigma SSP used or new possibly Rotel 1576 or 1582 if in the buget.
I would just like to plug my existing Mytek DAC+ in to the processor and use the bypass because the Mytek has MQA steaming and also phono stage which so far the used processors I am looking at do not have the phono option. So from what I have been told this will work? Moving to Mexico so I need to get this right. Also thinking of Krell S-1500 or Theater Standard as well as Anthem 5 channel power amps all used so I don't have to pay duty unlike the Rotel products.

Given what you're looking to do, and that unfortunately the Mytek looks like it only has one analog input that presumably will be taken by your turntable, you'd just run the analog out from the Mytek into the front L/R analog inputs on the prepro.  It's unfortunate because the output from the Brooklyn will have to pass through the prepro rather than passing directly to the amp. 

Maybe someone else has a thought, and just spitballing here, but if there's a high quality RCA 2 to 1 switcher that could take the outputs from the turntable and the front L/R outputs of the prepro and plug that into the analog input on the Mytek that could possibly be a workaround.  If you were confused before, I'm sure this only makes things worse. 

If 2-channel is relatively more important to you, a potentially cheaper way to go would be to get a decent AVR (Anthem, Yamaha, Marantz) to handle multichannel processing and amplifying your center and surround channels and buy a good integrated stereo amp with a HT bypass function.  With this setup, although you wouldn't be using the preamp function of the Brooklyn, only the DAC and integrated would be in the signal path for 2-channel and you could switch to HT with the push of one button.  This is the generally the way most people do it when combining a stereo and home theater system into one.  I think what you're trying to do is seamlessly pass through the signal from the Mytek through a prepro using an analog pass through (bypassing the volume control) on the prepro.  I'm not sure that pass through function exists on a prepro (unless maybe there's a way to use the tape loop to do it?), but regardless you'll end up having to send the DAC's signal through the prepro, which is really what you should be trying to avoid from a more purist perspective -- hence the recommendation for an integrated amp above. 

Now that I've probably got you thoroughly confused you I'll just sign off and leave you twisting.  Heh heh.  Just kidding -- I really am trying to help here.  Oh, and don't drink the water. That one's simple. 

Sorry my bad it turns out that your Mytek Brooklyn DAC Plus has one pair of analog input (rca) that can be configured as either linestage or phonostage input. But your Mytek does not have HT bypass or HT passthrough function. Therefore, you cannot use your Mytek as an all-in-one preamp and cannot expect to function as both linestage, phonostage and HT bypass. You will need a dedicated stereo preamp that can do all those functionalities. Or get a high end pre pro that performs really well in stereo for your stereo music playbacks for simplicity.

Out of the 3 pre pro choices that you listed above I highly recommend the Classe Sigma SSP if you value stereo performance for 2ch music playbacks. The Classe Sigma SSP is optimized for stereo music playbacks and its stereo performance is very good very musical especially coming from an AV pre pro whether when used as an anolog stereo preamp in bypass mode or when used as a digital stereo preamp connected via its USB input. But the Classe Sigma SSP lacks phonostage.

I suggest that you connect your Mytek via XLR analog to the XLR stereo analog input on the Classe Sigma SSP and set the Sigma SSP in digital bypass mode thus bypassing its DAC, DSP and other digital processings so the analog signal is kept in analog domain all the way to analog output stages, or otherwise DSP and other digital processings will get in the way and would have negative impact on sound quality. But first you must set the output of your Mytek to fixed thus disabling the volume control.
So you will use the volume in the Classe Sigma SSP basically you will be using the Sigma SSP as as analog stereo linestage preamp.
If you go with the Classe Sigma SSP you wouldn’t be needing a dedicated stereo preamp that has HT bypass function. The Sigma SSP performs really well in stereo and is optimized for stereo music playbacks.

As for phonostage I highly recommend that you get a standalone dedicated external phonostage preamp for your turntable. Standalone dedicated external phonostage pre will perform and sound way better than the one built in the preamp or pre pro or integrated amp. I highly doubt that a phonostage in your Mytek is any good either. Phonostage preamp plays important role for musical reproduction of your analog rig (turntable). There are countless options out there when it comes to dedicated standalone phonostage preamps depending on your budget. Audio Research, Musical Fidelity, Rogue, Cary, Rega, Naim, Pass make very good phonostage preamps. You can connect the phonostage pre via rca analog to the rca stereo analog linestage input on the Classe Sigma SSP and again you will have to select a digital bypass mode for that input on the Classe.

However, the Anthem AVM60 performs extraordinary in surrounds for movies (home theater) with its ARC2 (Anthem Room Correction) engaged and properly calibrated but its stereo performance for 2ch music playbacks isn’t on par with the Classe Sigma SSP. The Sigma SSP stereo performance is superior to the Anthem AVM60. But for surrounds or home theater the Anthem AVM60 will be a better choice than the Classe Sigma SSP and will likely outperform the Sigma SSP. If you go with the Anthem AVM60 I suggest that you get a high quality analog stereo linestage preamp that has HT bypass or HT passthrough feature for your stereo music playbacks. I think Soix has already given you instructions above on how to do it.

I would stay away from Rotel AV pre pro if I were you. Rotel always has had persistent issues with their HDMI switching boards and are very buggy. They also have firmware bugs and glitches with their AV processors and receivers. Rotel makes great sounding and musical amplifiers for the money. Their power amps, stereo integrated amps and stereo preamps sounded very good for the price but their AV processors and receivers are buggy.
Just wanting to warn you ahead of time.

Good luck and let us know what you end up getting.

The ARC2 (Anthem Room Correction) is one of top notch room correction and will make big difference for surrounds (HT) when set up and calibrated properly. 
The Anthem AVM60 is a perfect choice for home theater when set up right and calibrated properly using its ARC2 and it performs spectacular. And at $3k new retail price I think it's a steal IMO.

I know this an old post but I have a question on this topic.  First, my system:

B&W 803d3 speakers
B&W 802d2 surrounds
B&W HTM2D3 center
dual JL audio F113 subs
Classe Sigma SSP
Classe Delta 2300 and 5300 amps
Lumin T2 music server
Oppo 203 Blu-ray player.

Main speakers connected via XLR to the amps.

i just purchased the Lumin T2 to replace my computer connected to the Classe via USB for 2 channel music and streaming.  I have the Lumin connected via analog XLR to the Classe.  
I noticed the sound is cleaner when I set the Classe in digital bypass mode compared to not having ur set to bypass.  The problem in doing that is that now bass management  is turned off and no signal is going to subs.  Main speakers run full range.    The bass in the 803’s is good, but not as deep as I like, especially since I am used to the dual F 113’s.  I have gotten around this by connecting the sub via RCA to the left and right speaker jacks and using the subs internal bass management.  Would anyone know if a better way to solve this?

i have  had discussions with Dave Nauber at Classe on this topic.  He says that if I do NOT set it to bypass mode, I am still getting a  full analog signal and there would not be any degrading of the  signal.  Only the PEQ and bass management  would be processed. There would be no other processing by the Classe DAC. Can anyone help be understand why I can hear a note able improvement when in digital bypass mode?    

For 2 channel, this solution of connecting the subs to the LF and RF RCA jacks as pre outs seems to work, although I it forces me to to have my speakers run full range with a sub.  My dilemma  is when I need 5.1 for movies and want to set my speakers to small.  My Oppo is connected via HDMI .   Only way I can think to handle this would be to unhook the subs from the RCA jacks  and connect back to the sub out.  Not ideal and a pain to have to do this.

Any other solutions?  Would anyone suggest I sell my 803’s and get the 802’s to run full range without the subs for 2 channel only more bass?  unfortunately , that would be an expensive change.

Thanks in advance for reading this long post.