Starting out. - need your counsel

DTS, DD are pretty much standard on anything you will buy (the two formats are not compatible, but as I said, anything your going to buy these days will decode the 2) and THX EX 2 is the new kid on the block. THX EX gives you a rear center channel, it is not recorded as a dedicated channel, more like a matrix surround from the days of Pro Logic's rear channel...I was excited to hear the new wonder format, but found it not as cool as it was made out to be (just not that noticable as I had hoped it to be, however I was spoiled by Logic 7 from Lexicon which does a great 7 channel surround). With that in mind, plus you say you have a SACD player (I assume its SACD Multi Channel) I would recommend Lexicon (only the MC12 does SACD Multi, and is expen$ive), Bryston, Anthem, or Proceed. There are many others I'm sure you'll hear about but the ones I mention will certainly get you started. They range from rounghly $10K-3K new. If you want cheaper, and don't care about the SACD Multi channel, or mind analoge signals being converted to digital for processing, then back to analoge, I'd say look at Lexicon MC1 or DC2. Lexicon make great HT stuff.

Have fun;)

(Why would a preamp unit take a high quality multichannel SACD or DVD sourced analog signal and reconvert it into digital, and then again into analog? That make no sense.)

I really don't want to play SACDs on this theatre rig. Just movies. Tapes and DVDs. I know that there are video or digital outs on the DVD player, is that how I would connect it to the pre/processor?

What do these units do with DVD video soundtracks? Can't I get something under $500?

Another good source for inexpensive Dolby Digital would be to use a receiver as your source. Most of these have 5.1 channel pass-throughs that remain unprocessed in the digital domain. I would recommend you look at the Outlaw Audio 1050 receiver. You can get one new for $500 from there website or sometimes find used ones for $350-400.
http://www.outlawaudio.com
The cheapest pre's that I have seen used are the Harman Kardan Signature 2.0 ($450 at ebay or audiogon but they all come from ubid.com) the sony tae-9000 (I think is the number also comes from ubid originally then to ebay and audiogon $700), and the Legacy Audio (is a proton) pre-amp that was selling on ebay for $275. I use a Denon 2801 as my pre (with rotel amps) and am happy with it until I can afford a dedicated system. Another idea would be to look for a older rotel pre that has a 25 pin connector and connect it to a rotel dolby digital decoder (about $500 for this but the goods are a little older). If you are concerned about ground loops then I would recommend the monster series of power centres hts 2000 or 2500. They can be had for 110-170 on ebay and they eliminated the cable ground loop in my system (this was the only product that would do it as I had cable that was not installed properly).

Patrick

A simple reciever with analog by pass sounds good. Will most recievers allow you to run separate amps through line output?