Basic Questions

There are a lot of questions there.

If you want high quality two channel sound the best way to get there is through a completely different 2 channel system. AVRs do not create high quality sound… too much stuff in a box. If this is not the route you want to take, then @mceljo +1 This would be the first step. Or better yet a separate preamp and amp.

While technically a preamp is sometimes not required, the reality in +98% of the time they are (especially without huge knowledge and carefull choices). They bring the magic. They take the really small line level signal and ever so carefully amplify it and very carefully enable you to control the volume and source.

Ideally you want carefully chosen high quality components… for instance:

$1K streamer, $1K DAC, $1K preamp, $1K amp, and $3K speakers.. Double the investment in each component (all) and you will get a strikingly better sounding and far more satisfying system. But, well chosen… they must be chosen to match your taste and be synergistic with the rest of your components.

I have been improving and enjoying high end 2 channel sound for fifty years. My components are now at the $22K, $17K, $17K, $34K, $32K respectively. You can see my systems… including my home theater system under my UserID. The most rewarding system I have heard.

I would rather separate my 2 channel system and build it in a large walk in closet, than combine with my home theater. Carefully building a system to your space is critical. They have completely different requirements and the compromises of the HT generally make it really difficult to achieve high quality sound. Movies need less quality and more bang because you are distracted by the video.

So, I guess, if you are interested in putting together a high end system. I would recommend Robert Harley’s book, the compete guide to high end audio to give you the lay of the land.

@ghdprentice +1, someone gave me that advice when I was looking at tube pres with HT bypass. The light bulb moment hit and I focused on the BEST MCH system I could have in my HT and moved my 2 CH to my desktop. More satisfying and less money that trying to have 1 system do both things well. I still listen to two CH in the HT but only about 10% of the time.

OP, if you want GREAT MCH SQ on music and movies I can post what worked for me, let me know. I found it much more rewarding to focus on power and front end components.

What six said, start over. Quality stereo starts without an AVR. I have one surround and two stereo systems in the same space.

You'll get there.

Soix nailed it! Very easy to have 2 channel sound separated out from your home theater using the same pair of main speakers w/ that scenario. I suggest you get a good integrated amp w/ a good phono amp & home theater bypass. You can connect your CD player, streamer /,DAC, turntable etc directly to the new amp & play music with your receiver & TV off & not in the signal path at all.  When you want to watch movies both the receiver & the new integrated are on. 
 

I do exactly this in a pretty high end system but chose to go with a tube integrated so to save tube life, I don’t bother turning on the integrated if just watching basic TV & not movies & just utilize the receiver w/ the center channel, 2 surrounds & sub on  . Works great. Then if I  want to watch a movie or show where sound matters, turn on the integrated & get the full effect. My turntable/ phono amp & my DAC ( w/ both my streamer & CD transport) are both directly connected to my integrated amp. Effectively, two systems in one. 

Home Theater Bypass is your friend. Use the AVR (or better yet separate processor and amps) for home theater and use an integrated as suggested or separate amps and preamp for two channel. HTBP allows you to divert the two mains to HT use and offers much better sound quality for two channel listening. There's a lot of electronics stuffed into an AVR and a lot of compromises to get all that stuff in one box.