why is a step up transformer used

It is used because the gain of the phono stage is insufficient for the cartridge used. Low output cartridges are popular because MOST think they sound better. The immortal "MC or MM thread" shows that this question will never be settled. Good SUTs sound very good; it is your choice.

Sorry, I wasn't as clear as I wanted to be in my comments above.

The Krell KPE phono stage could only be powered from the Krell preamp's power supply or an external power supply. The external power supply didn't give the KPE any extra gain, (for the cartridge) than the power supply from the preamp. It just saved the owner some money if they already had the preamp.

The step-up transformer in the phono stage is used to optimize the impedance mismatch between a low output moving coil cartridge and the phone stage itself. It is a passive device. The phono circuit is an active device and has enough gain for moving magnet cartridges because they are high output devices. Very low output moving coils may only have 1/10 of the output of a moving magnet cartridge, and therefore need a signal 'boost' in order to be amplified properly by the phone stage. The typical scenario is you turned the volume control past 2 o'clock and you still can't hear the music very well and now you have a lot more noise. An interesting fact; when you listen to vinyl you are using not only the phone stage, but the line stage as well.