Krell HTS 7.1 vs Denon AVR-X4300H

First question, are you intending on replacing your current 2 channel system (McIntosh MA6600 and MCD550)?  Or do you just want to build a home theater and still keep your 2 channel system?  If you are intending on replacing the 2 channel system, you are not likely to get the type of sound or quality of sound with the budget you have.  I would recommend looking at the higher end McIntosh processors (for example, there's a couple of really good condition MX150s on audiogon for $3500).

To answer your question, the two options you have are really different.  The Krell is going to be very fast and high bandwidth.  This means you will have a lot of attack and clarity in the sound.  This is great for home theater and movies, but some people don't like it for music.  I love the Krell sound personally. Some people feel that the Krell is too forward and "in your face".  But in movies, I think it's important to be able to hear every single subtle sound.  That being said, the HTS 7.1 is going to be 15 years old.  If you can get a nice one where everything works, that's great.  You might want to have the power supply board re-capped as the caps have aged and dried out by now.  Also, I have seen both the digital input sections fail as well as some of the analog sections after all this time.  And, of course, you will need to use the COAX or toslink digital inputs.  You will be limited to compressed Dolby Digital and DTS audio.  Also, the HTS 7.1 will down-convert any hi-res audio to 48Khz (i.e. a 24/96 track will be down-converted to 24/48).

The Denon receiver is not going to be able to produce the quality of sound.  I think the Denon may be a warmer sound than the Krell (not as forward or in your face).  I wouldn't use the Denon in this situation (unless you already have it and just want to put together a home theater). 

The McIntosh sonic signature is very laid back and warm (many people love this for music).  Based on your budget of around $1000, I would recommend looking at a used Marantz AV7702 processor (they are going from $800-1200).  The Marantz sound is going to be on the warm side of neutral, but still very detailed.  This may be a good match for you, based on your music tastes and still be a nice processor for home theater.  Since the Marantz has HDMI, you will be able to take advantage of the uncompressed bluray sound formats (DTS-HD MA and Dolby TrueHD).  Also, you can play hi-res audio through the HDMI cable as well.

The HTS 7.1 was a $8000 processor, and I think it was an extremely good processor. I had it for a long time. It makes a good 2-channel analog preamp, though I would say that it’s slightly soft for a 2-channel preamp because of its analog input stage. It can sound very good when used as a digital DAC/processor, but it is getting very old at this point.

The McIntosh MX150 aren’t that old. They are only 2 generations old and MX150 does support HDMI and bluray formats. Though, it is not new enough to support 4K (it’s only HDMI 1.3). I suggested it because you liked your 2-channel McIntosh setup.

In reference to your Denon, it is a receiver, which means a good portion of the unit cost has to go into the amplifier section. It may sound okay, but you’ll get much better sound quality with a dedicated processor. I recommended the Marantz because it does have an excellent design for a processor at that level. Good power supply (2 x 10,000uf capacitors) and discrete balanced output stages. Sonic signature is a little on the warm side, so it will not be as fast on the attack as the Krell stuff (or other processors such as Anthem or Arcam). I wouldn’t go for a KRC3 since you already have such an excellent 2 channel system. I think the Marantz will do a good 2-channel representation as well as provide for a good theater experience. The KRC-3 is on the warm side and others have had better experience with something newer like the Parasound P7.

Trying to make an awesome sounding 2-channel plus home theater system is going to cost a whole lot of money.  The best you can you can do with that budget is something decent.  It's not going to compete with your McIntosh 2-channel system, but it should sound pretty good anyways.

The Oppo does have excellent video processing, so you would not lose anything by going directly to the projector.  I don't think any 4K processor/receiver would be better in this case.  The only thing that could be better than Oppo video processing is if you put in a Lumagen before the projector to do the processing and color correction.

You could certainly connect the 7.1 analog output from the Oppo to the 7.1 input on the HTS 7.1.  At this point, the Krell becomes a pure analog preamp (it won't mess with any analog-to-digital-to-analog conversion and you'd get the full resolution of any hi-res audio from the Oppo).  This would give you pretty good resolution.  Just make sure the 7.1 is in full working condition.  And keep in mind that the reliability of this older product may not be long.

The resolution of the KRC 3 is not going to be as good as the HTS 7.1.  If you went this choice, I would highly recommend having the KRC 3 recapped - using best quality capacitors available.  The KRC series was warmer with generally less resolution, as well as the KAV 500 amp.

The only reason to use a 2-channel preamp is if you didn't care about the quality of HT at all (in other words, HT is just something to watch movies on and takes much lower priority for sound quality).  In this case, you could use the left/right out of your Denon receiver to use on an input to the KRC 3 in pass-through mode.  Then use Denon receiver to power all other channels. 

Can this be done:

connect OPPO to KRC3 and HTS7.1 and then to krell KAV500?

I would not do this at all.  You are running the audio signal through two preamps, first a very low resolution KRC3 and then a nice but soft HTS 7.1.  Trying to merge both a 2-channel system and an HT system together with both 2-channel and multi-channel preamps is not a good approach.  Like I said, you really can't have both worlds unless you spend a lot of money.  If you're looking at the really old Krell stuff, I would just get an HTS 7.1 and use it as a 7.1 preamp with the Oppo.  The preamp quality of the HTS 7.1 is much better than the KRC 3.  I know you like the asthetics, but this will not actually improve the sound quality if you have both of this in the signal line.

The MX119 and MX132 are likely going to have similar characteristics to your 2-channel McIntosh system. Mac is typically warm, smooth and laid back sound. Krell is more forward with attack and clarity. Personally, I would go the Krell route if you were putting together a home theater, unless you are after the McIntosh asthetics and sound character.

The MX119 and MX132 are very old. Yes, you can use them as pure analog preamps, but they are only single ended internally. If you are after a pure analog preamp, look into the Parasound P7. It is a much newer device, fully balanced internally, and is only a 7-channel pure analog preamp. There is no digital processing or video capability. It is likely going to have better resolution than either the McIntosh or Krell devices you are currently looking at. If you want to know more about the McIntosh stuff, go over to the audioaficionado.org forum. There’s a McIntosh subforum with a large following. You could post questions there.

However, I will say that there is a "magic" in the Krell Class-A circuits that started with the HTS 7.1 generation which adds something to the sound (the core sound from the Oppo doesn’t have this magic character). The older KRC3 doesn’t have this "magic" character (though I don’t know what would happen if you re-capped / upgraded the KRC3). The soft input stage of the HTS 7.1 will give it somewhat of a laid back sound, but it will keep the clarity and magic of the Krell output stage.