2) The processor does/can apply bass management to the 7.1 inputs. The unit has direct and pure audio described as: Direct - This mode allows you to enjoy pure sounds straight from an original source. Every channel of the input source will be output “as is” to respective channels. Pure Audio - In addition to the Direct mode, playback of music faithful to the original sounds is enabled because display window is turned off to minimize noise (the power supply to the video circuitry is also off, so nothing is displayed on the screen).
I believe Multichannel mode allows for bass management on the Multichannel inputs. I know it applies the a/d d/a conversion because the following playback modes are supported in addition to multichannel, direct and pure audio: Stereo, Mono, THX, Mono Movie, Enhance, Orchestra, Unplugged, Studio-Mix, TV Logic, All Ch Stereo, Full Mono and Dolby VS