Home Theater Bypass , why am I hearing this now.

Did I hear my name mentioned? lol.  Just kidding.

I will disagree with maxwave here in the idea that most HT processors will add "coloration" to the system.  There are some that may add some coloration, but for the most part HT Processors are engineered to be as fast responding and transparent as possible (this is really needed for movies). 

The Marantz processors are actually quite excellent for the money.  Large power supplies and good full bass / midbass.  Good overall impact on sound.  However, like all Marantz, they are voiced just a tiny bit warm and will soften/roll-off the high frequencies.  If you are looking for better high frequency resolution, you can do one of two things:

1. Change to a different HT Processor (possibly spending upwards of $8-10k even on a used one).  This will get you better resolution for your stereo hi-res than what the Marantz offers.

2. Put in a preamp and use HTBP mode when watching movies.  This is just a preamp connected between your HT Processor and your amps for left/right speakers.  When the preamp activates the "home theater bypass mode", it essentially just makes a direct connection between that input and the output of the preamp.  This is almost the same as a direct wire connection as if the preamp wasn't there at all (the audio signal does not go through the preamp audio stages at all).  When you want to listen to a hi-res DAC or streaming source, just switch the preamp to that source and it "takes over" the sound duties for left/right channel.

Make sense?

If you go the preamp with HTBP route, also be aware that many preamps are much more colored than HT Processors.  And just because you get a preamp doesn't mean that it's actually going to sound better than some processors.  For example, the Parasound P6 (or even superior P7) will not match the sound of some HT Processors such as Bryston SP3, Krell S1200 - or even the Krell Foundation and McIntosh processors.  The Bryston SP3 and Krell S1200 actually have discrete analog stages which are at the high-end 2-channel preamp level.  The only way to beat those would be to get a dedicated Bryston/Krell preamp.  The Krell Foundation 4K processor would beat the Parasound P6 preamp.  But then again, there are still higher end preamps out there that would definitely beat Krell Foundation.

So, in the end, if you are happy with the TV/movie sound of your Marantz HT Processor, then you may want to consider the preamp / HTBP route to really give you a boost on 2-channel audio sources (i.e. Denafrips DAC).

If you want a better TV/movie experience as well as better 2-channel audio, you may want to consider a higher resolution HT Processor instead.  If you are willing to consider used, I would go for the Krell Foundation 4K at a bare minimum.  But if you are willing to spend upwards of $8-10k, I would look at a used McIntosh MX160 maybe.

By coloration , I included the averadge quality electrical isolation and vibration control of a HT processor compared to highend integrated amplifier or preamp with HT bypass.

Ah okay. In my mind, "coloration" is a purposeful design of an audio circuit that causes a certain type of behavior or sound. This can be described as audio equipment that is purposely engineered to sound laid back or tube like or boomy or sharp or textured or lush or warm (etc., etc.). The entire 2-channel industry is geared towards many of these direction.

I think what you are talking about is compromises in the electrical parts of a HT Processor, and there are several. Pretty much most of these have to do with power supply type and design. There is a large amount of HT Processors that will use linear power supply for analog stage, but will still use a small switching power supply for digital sections (including DAC). This causes problems such as power supply jitter and lack of current that impacts sound quality. Many processors such as Onkyo / Marantz use switching power for digital sections. This is seen even on high end processors, such as Lyngdorf MP50 which uses switching power supply for everthying. The seriously expensive Trinnov Altitude also use switching power supplies (it’s essentially a computer motherboard), but they -might- use a linear power supply for audio.

One reason I like Krell processors is that they use linear power supply stages for everything (including digital). I think McIntosh processors use linear for everything as well.

The Bryston SP3 uses linear power for everything, but I think this is one of those where design of the circuit impacts sound result. Don’t get me wrong, this processor sounds very good. However, it has one big honking main power supply for analog, but then all those discrete analog circuits do not have any local power supply filter caps. This combined with what I think is a very high bias Class A analog circuit results in a sound that has probably the strongest and fullest bass I have ever heard from a processor. However, the upper mids and high lack speed and impact and it makes this seem like a very laid back sound. I just never was happy with this one (it also had an effect like I wanted to keep turning up the volume but the impact never got there).

Oh, just re-read and figured out that you don't have a processor/amp setup yet.  You only have a AV Receiver (which is okay, but leaves a huge area for upgrade).  So, my comments:

You can't really use a "preamp HTBP" with your current receiver unless you get a separate amp for this scenario.  If you want to upgrade your entire HT, I would go with the Krell Foundation 4K at a minimum.  When you are ready to support 4K HDR video sources, you can always get the Krell 4K HDR switcher to handle this (it works with the Foundation 4K).

If you just want to do the HTBP route, you'll need to get a either a preamp/amp setup or a really good "integrated amp" such as the Kinki Studio EX-M1+ and use the pre-outs on your receiver to drive any HT movies.  Then you can go your direction with Denafrips / Prisma NP5.

I wouldn't really consider the Marantz 7706 just for "8K" support.  In my opinion, we really didn't need 4K unless you had a seriously large screen (such as 70" diagonal or higher).  What really improved things was "4K HDR" which expanded the color and brightness range.  At this point, 8K becomes almost nonsensical (but it's the next big thing so consumers will glom onto that).

If you do the Prism NP5, I would seriously consider a linear power supply upgrade (I'd recommend Farad Super 3 or even a lower cost Teddy Pardo).  This will significantly improve your sound quality for that Denafrips.