Very interesting write-up. Since I don't have an 970, I can't speak to how the two modes compare. Two thoughts do come to mind though, and both might be interesting experiments for you. One is to ask if you were still using the analog input when you switched from bypass to stereo - if so, it's possible the ADC is actually the culprit in the soundstage changes rather than the bass management, and using a digital input could yield different results. The other thought is to ask if you're using the 7.1 Direct input currently. If not, you might try running the left and right channels from your CD source to the left and right channels of the 7.1 Direct input (also known as the DVD input's left and right channels) and set the 7.1 Direct input's bass management switch to "HPF/LPF" to apply the analog crossovers so that the subwoofer gets in the game for analog sources.