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Re: Which reciever?
there is a good primer at aperion universtiy.
it sounds like you have the space for 7.1. the next question is can you place the speakers where they should go.
but regardless of that, for $500, you're pretty much only going to be looking at 7.1 avr's unless you are looking into NOS, closeouts, used or something unusual. so i'd not worry about that.
there's a lot to be said for upgrading piece by piece. that said, your biggest impact sound-wise will come with new speakers. even if you just change your front 3, it should deliver an immediate and noticeable improvement, even with speakers costing $100 a piece give or take. (i see john beat me to it on this opinion.)
but if you really want the new avr first, read around the link above, decide which features are a priority for you and then shop for brand and price. at $500 you should stick with brands like onkyo, yamaha, pioneer and even better quality-wise, denon and marantz. steer clear of sony in this price range (and h/k).
good luck
HT: Marantz SR8000, PSB Alpha B fronts, Alpha C center, CSW New Ensemble surrounds, Martin Logan Dynamo Sub, Philips DVD, Sony CRT TV
Stereos include vintage Sony receivers/amps into vintage AR and KEF speakers.
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