low vs high gain

Chris, only if your preamp is incapable of driving the amp to full output at the lower gain will dynamics be affected by the lower gain in the power amp. For example, if the gain at 32db settings means that .5 volts at the preamp output will drive the amp to full power, then 2.0 volts will drive the power amp to full power at the lower 26db gain. If your preamp, however, is incapable of producing 2 volts into the power amp, then it will not be driven to full power, hence 'lack of dynamic'. This not a problem, usually and therefore the more the signal is amplified before the power amp the better the SN at the speakers will be, especially with very sensitive speakers.
In other words, use the lowest gain that does not drive the preamp into distortion for the highet volume that you will be using.
Bob p.

I can think of no technical reason that the gain setting would tie to dynamics as you describe unless you are just horridly mismatched.

When you look at an amp's specs, you'll see a sensitivity value. For example, my amp needs 1.5 volts at the input jack to produce full power output of 150 watts per channel. While my amp is not gain switchable, if it were and I changed it to where 0.75 volts now gave the full 150 watts, I'd still have the same power but I'd be running with the volume knob on my preamp at a much lower setting.

The catch is that increase amp sensitivity is also amplifying the preamp and source background noise as well as the signal. If your higher amp sensitivity setting ended up elevating your noise floor, you could actually end up with less dynamic range as the quiet passages would end up degraded by the poor signal noise ratio.

People also have interesting psychological expectations regarding the position of a volume knob. Some get uncomfortable with the knob in a very high position (say 3 o'clock or higher on a traditional knob) so they acutally back off and end up listening at a slightly lower actual volume. In that case the person ends up inaccurately matching volumes between the two settings and is in reality listening to the high-gain setting at a higher volume. This would give the impression you noted.

Thank you all for your responses. I'll ask the manufacturer to reset the gain to 26dB (if that is possible).

Chris