Replace my Marantz AV7702mkII?

I live in a condo I don’t have the luxury of multiple dedicated listening rooms, I need to compromise.

Good news — you absolutely do NOT need to compromise.  Keep on using your Marantz for HT and seamlessly incorporate a dedicated stereo preamp into your existing system.  For critical 2-channel listening the prepro will be completely out of the signal path, and you can switch between HT and stereo by pushing a button.  If this is of interest I can go over the connections, but it’s exceedingly simple and many of us here have used this setup before we got dedicated listening rooms. 

You could do soix's recommendation.  But if you are looking for a HT pre/pro, probably the best one I can think of that meets your needs is the Bryston SP3.  It has a fully discrete and fully balanced input stage for your 2-channel stereo analog inputs.  It also has its fully discrete fully balanced analog output stages.  It does convert all analog to single-ended internally for volume control.  It's not the best DAC/DSP (I think the DSP/DAC board is compromised), but it's an excellent analog preamp.  You can get one used and then have Bryston upgrade the HDMI board for HDMI 2.0 4K support.  The Bryston will not have all the bells & whistles of the Marantz such as Bluetooth, HELOS audio, etc. etc.  It's a bare-bones high end pre/pro.

The Krell Foundation is going to have much better high frequency resolution response and excitement.  But it is still an op-amp based processor.  The Marantz 7702 is very nice because of large power supply and discrete analog output stages.  Sound is very full with a lot of impact, but the high frequencies are slightly rolled off when compared to Bryston/Krell.

A good preamp with home theater bypass is the way to go. 

If this is of interest I can go over the connections

@soix Yes, I am very interested in the connections to do this. I have read other posts saying it is easy, but have not fully understood how. For example, does the 2 chan pre need to be on when watching a movie? I think so, but that means a tube pre is kinda out of the question, since it would burn through the tubes much quicker.
Thanks for the help!

For example, does the 2 chan pre need to be on when watching a movie? I think so, but that means a tube pre is kinda out of the question, since it would burn through the tubes much quicker.

Your amp(s) will connect to the preamp.  The signal is routed from the preamp to your HT processor where the amp input, bypassing the preamp.  Some preamps need to be powered on, others don't. 

I use a tube preamp this way.  I listen to music much more than I listen to movies.  I don't worry much about tube life.  If I wasn't watching a movie, I'd probably be listening to music.  I don't generally use the front two speakers when listening to TV, I leave the preamp off and listen through the center channel from the HT processor.

does the 2 chan pre need to be on when watching a movie? I think so, but that means a tube pre is kinda out of the question

Well, yeah, but you don’t have a tube option at all using only a prepro, right? The point is, even a good solid state stereo preamp will likely provide better performance — and give you a ton more potential options — than using the prepro for stereo and would also allow you to just keep using your Marantz for HT duties.

If you want to use a tubed stereo pre there are a few that don’t require to be powered on for HT (maybe VAC, Backert, Rogue?) but not many. Another way to look at it is that if you find a tube pre you really like the tubes in many tube pres can last thousands of hours and aren’t necessarily too expensive to replace so may still be a worthwhile option for the benefit enjoying some tube magic.

For hookup you only only need to run the front L/R pre outs from the Marantz into the stereo pre and connect the stereo preamp to the amp powering your front L/R speakers and you’re pretty much done other than plugging your 2-channel source into the stereo preamp. Only requires an extra pair of interconnects. Hope this helps, and best of luck.

@soix Thank you for the information, it has been very helpful.