Surround vs stereo challenges

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LAV

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Hi guys, OK, I acknowledge that having your AV system to also be an acceptable stereo system is always a challenge, but bear with me. My existing AV amp is a 7-year old Yamaha RX-V800 5.1. I don't use the internal amps for main L&R, but instead drive a Rotel RB-1070 which drives a pair of B&W DM683s. I recently decided to upgrade the receiver and now have a Yamaha RX-V765 (presently on eval.). This is a 7.1 unit with HDMI.

Now the interesting part: On the older amp, even when in normal stereo mode (i.e. analogue audio in, tone controls neutral, no processing on), the RX-V800 sounds rather good. Switching it into bypass (Yamaha calls this pure direct), there is a small, just perceptible improvement in quality.

Doing the same on the new RX-V765: When in normal stereo mode under the same conditions as above, sound is "muddy", excessive low end but not enough high frequencies. Switching it into "Pure direct" there is a 5x difference in perceived quality.

Yes, bypass/source direct switching should be better than via a bunch of circuitry, but, with processing off and tone controls neutral, having this make such a huge difference makes me concerned. Q: Is this normal or is something amiss? Surely stereo repr. should not suffer that much, given advances in technology? I am disappointed that my older receiver of 7-8 yrs outperforms the new one.
 
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