Replace my Marantz AV7702mkII?

I live in a condo I don’t have the luxury of multiple dedicated listening rooms, I need to compromise.

Good news — you absolutely do NOT need to compromise.  Keep on using your Marantz for HT and seamlessly incorporate a dedicated stereo preamp into your existing system.  For critical 2-channel listening the prepro will be completely out of the signal path, and you can switch between HT and stereo by pushing a button.  If this is of interest I can go over the connections, but it’s exceedingly simple and many of us here have used this setup before we got dedicated listening rooms. 

You could do soix's recommendation.  But if you are looking for a HT pre/pro, probably the best one I can think of that meets your needs is the Bryston SP3.  It has a fully discrete and fully balanced input stage for your 2-channel stereo analog inputs.  It also has its fully discrete fully balanced analog output stages.  It does convert all analog to single-ended internally for volume control.  It's not the best DAC/DSP (I think the DSP/DAC board is compromised), but it's an excellent analog preamp.  You can get one used and then have Bryston upgrade the HDMI board for HDMI 2.0 4K support.  The Bryston will not have all the bells & whistles of the Marantz such as Bluetooth, HELOS audio, etc. etc.  It's a bare-bones high end pre/pro.

The Krell Foundation is going to have much better high frequency resolution response and excitement.  But it is still an op-amp based processor.  The Marantz 7702 is very nice because of large power supply and discrete analog output stages.  Sound is very full with a lot of impact, but the high frequencies are slightly rolled off when compared to Bryston/Krell.

A good preamp with home theater bypass is the way to go. 

If this is of interest I can go over the connections

@soix Yes, I am very interested in the connections to do this. I have read other posts saying it is easy, but have not fully understood how. For example, does the 2 chan pre need to be on when watching a movie? I think so, but that means a tube pre is kinda out of the question, since it would burn through the tubes much quicker.
Thanks for the help!

For example, does the 2 chan pre need to be on when watching a movie? I think so, but that means a tube pre is kinda out of the question, since it would burn through the tubes much quicker.

Your amp(s) will connect to the preamp.  The signal is routed from the preamp to your HT processor where the amp input, bypassing the preamp.  Some preamps need to be powered on, others don't. 

I use a tube preamp this way.  I listen to music much more than I listen to movies.  I don't worry much about tube life.  If I wasn't watching a movie, I'd probably be listening to music.  I don't generally use the front two speakers when listening to TV, I leave the preamp off and listen through the center channel from the HT processor.