i found this, for what it's worth, with respect to denon/marnatz avrs:
in DIRECT and PURE DIRECT modes, the receiver bypasses most (or all) of the additional processing circuitry such as Tone Controls (bass/treble) and Bass Management. Theoretically, bypassing or shutting off any unneeded circuitry should deliver slightly "purer" audio quality; in practice, you may or may not hear a difference.
If you look in Denon's manuals, they quote their S/N ratio specs in DIRECT mode, which implies that DIRECT will have a slightly lower noise floor than regular STEREO mode.
The key functional difference for most setups is that, when in DIRECT or PURE DIRECT mode, the speakers are treated as large regardless of how you set things up in the 2CH DIRECT/STEREO menu.
The only difference between DIRECT and PURE DIRECT mode is that PURE DIRECT shuts off all the video circuitry, including the display on the receiver itself. Note that if you use PURE DIRECT with an HDMI source, the video will still remain on as the receiver needs to keep the HDMI circuitry active to process the audio. In other respects they are the same; PURE DIRECT and DIRECT share all settings, including surround parameters, subwoofer mode, channel levels, etc.
To set up audio for 2-channel listening, you need to use the 2CH DIRECT/STEREO menu found under MANUAL SETUP > AUDIO SETUP. However, because of the quirks of DIRECT and PURE DIRECT modes, the settings are not always obvious in how they function. In typical Denon fashion, the settings do NOT apply equally to STEREO and DIRECT modes! Here is a summary of the behavior of this special sub menu:
When in DIRECT or PURE DIRECT mode:
- "Small" vs. "Large" is ignored (the front speakers are always treated as "large")
- The subwoofer will be active only if the LFE+lace w:st="on">MAIN setting is on, and it will be "double bass" because the front speakers will be treated as "large". ** note that you can still have the sub set to LFE in the "normal" subwoofer setup menu, this is just referring to the "2CH DIRECT/STEREO" settings
- The "crossover" frequency effectively functions as an LPF (low pass filter) for the subwoofer's "double bass", but does NOT affect the fronts (again, because of the first bullet point). The "crossover" thus effectively becomes an upper limit or "cap" for the double bass effect. So a good strategy is to set the "crossover" to where your front speakers naturally roll off, to try and get a smooth "blend" despite the double bass.
all that said, it seems that at least with denon/marantz you can use a "direct" digitally-bypassed 2ch setting and still have an active sub, albeit the avr will send low frequncies to both the fronts and the sub (hence the double bass referred to above)which, as martykl suggests would create integration challenges