Thank you very much for your questions.
I do a question that I was afraid to ask until I found this thread .
I just connected an external amp to my receiver's PREOUT and the sound improved dramatically (allot more detail). When the audio is sent to an external amp, does the receiver's internal processing (with the exception of the receivers features like CODECs) get bypassed?
if so, why are processors so expensive, just because of features like DAC and so on?
Hi allEars,
First, it's about time someone finally found this thread about being afraid of asking questions.
The audio is not sent to your external amp; the audio signal that is sent by the source (Blu-ray player, DVD player, CD player, etc.) is going though your receiver. The external amp is now the new amplification (from the channel preout that you choose of your receiver), by amplifying that audio source signal now in your receiver, with the receiver own amps taking care of the other channels remaining, and going to your speakers. But you knew that, I'm sure.
The receiver's internal processing is certainly not bypassed. It is still well active, very much still alive and well in the audio signal path.
So, NO, nothing is bypassed, even the audio codecs.
Adding external amplification to a receiver does just that, it amplifies the audio signals with all the internal processing of the receiver, and all the audio codecs. You have the choice to use as much processing you like, or as less possible for minimal contamination of the audio signal.
* [Some people that are purists, only use analog front end in their system with straight audio signal path. Example: a high end turntable with a high end phono pre/amp and a super low distortion amplifier.] *
The only thing that is bypassed is the receiver's own channel amps that you decide to reamplify with your external amplifier. But they are not totally disabled, they remain iddling (like kind of "in standby").
So, for your last question, it does not fully apply in this case.
And YES, usually Pre/Pro are quite expensive, because they use the best parts (Dacs, DSPs, more DSPs, more Dacs, sometimes in Balanced Dual Differential mode, they also used XLR Balanced connections, sometimes they are Truly Balanced from inputs to outputs, top grade quality constuction and circuitry with the best components available at the time of build, etc., etc., etc.).
BUT, in the last few years, we saw a new trend; more affordable Pre/Pros with excellent sound quality still available. Just for a quick example: the Onkyo Pro PR-SC885P that appeared last year (or was it in 2007), anyway, was listed at $1,899, but was selling for only $539 last april! This is an amazing value. Now the price for that same unit is $749.99, still an amazing price.
And it's replacement, the Onkyo Pro PR-SC886P, which is a very nice improvement over it's older brother, is selling right now at $999.99, but can be found for only $899.99.
I mean, these prices are just amazing now. A good Pre/Pro used to cost in excess of $10,000 (and you can still find some that cost over $30,000).
I hope that this helps you to understand better what you were asking.
And never be afraid of asking any type of questions.
And if you have more questions, please, please, please, do ask them right here. I'm starving to answer any type of questions, any type at all, and I mean it.

Plus, if I don't know the answer(s), someone else will, right here.
I am your humble servitor, and always at your disposition, allEars.
Hope to see you back very soon,
Bob