For that budget, option 2 sounds good until you are ready to go 7.1 and beyond. For example a Monolith 200 WX5 for $1,399 The T787 is dated, aside from its relatively strong amp section, even the recently reviewed AVR-X3600H, or a $699 AVR-X3500H should out perform it in both digital and analog. Even the amp section, despite the weight, two transformers and a lot of storage caps, it couldn't do better than a mid range Denon AVR, based on S&V's bench tests. It also has very average DAC and preamp specs, but I doubt it would have much audible effects. That's just my opinion, though I did take a look of its specs, service manual and a couple of reviews including S&V's, before I offer my 2 cents.