Thank you for all of your feedback! It turns out that cfinfig wins the prize. It is absurd, but you actually have to use the Line 2 input rather than the Line 1 input. That explanation is exactly what happened. I can't imagine the designer configuring this device for the primary connection to Line 2 rather than Line 1, but maybe he wanted to drive everyone crazy. Everything is working correctly now thanks to all of your help. Every time a cd is placed in the machine or in between tracks, the music plays as it should and is no longer cutting out for 3 seconds.
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Outlaw 990/7700, Oppo DV-981HD, Gallo S.A.Amp, Nucleus Ref. 3.1, AV C, AV M, TR-2, Paradigm Atom, Pioneer PDP-4214HD, Mtrola DCT6200/2005
Outlaw 990, Aragon 8008X3, 8008, Denon 3930CI, Dahlquist DQ20, Outlaw LFM-1+, Paradigm Atom, Mtrola DCT3416 I