if my component has an optical output and i connect it to my 970 then i would be using my 970 DAC's to process the signal. but if i use my analog outputs from say my CD player then i would not be utilizing my 970 DAC's. is this correct?

Basically. There are actually three options, though.

1. Digital connection from source to 970 (optical or coaxial): using 970's DAC's.
2. Analog connection from source to 970, bypass mode selected: using source component's DAC's (970's digital section is bypassed, including bass management and surround processing modes)
3. Analog connection from source to 970, mode other than bypass (such as Stereo, DTS NEO:6, Dolby Pro Logic IIx, or 5/7 Stereo) selected: using source component's DAC's, 970's ADC's (to convert analog signal to digital for processing by the DSP section of the 970), and the 970's DAC's

All of that assumes that you are using stereo analog inputs. The 7.1 analog input is governed by the three-position toggle switch on the rear panel (with three more options: a bypass that behaves like the bypass described in option 2 above; a high-pass filter/low-pass filter that behaves as described in option 2 but with an 80Hz analog bass management circuit in the mix; and a digital setting that behaves as described in option 3).

Gonk,

Could Option 3 ever be a better option than Option 1?

Option 3 doesn't really have a lot to recommend itself. For purely analog sources, of course, it's the only game in town if you want surround sound. If you do have a digital output available, though, I'd certainly prefer to use it and can't think of a scenario where option 3 would be better than option 1 for a source that offers both digital and analog outputs.

Ok thanks...I guess my short term memory forgot all about "other" sources of analog aside from CD players...I haven't had a tape deck, VCR, or even turn table in quite some time

come to think of it, i would seem pretty strange converting any of those sources into 5-channel.

My old tape deck departed in a yard sale last month along with a really cheap VCR, and my remaining S-VHS VCR is connected directly to an input on my DVD recorder. There are a few analog sources that I could see using something like Pro Logic II with, such as a LaserDisc player, VCR, or non-HD digital cable box that lacked digital output, as any of those could provide a stereo signal that including Pro Logic decoding cues. I have on occasion also used the analog output of an iPod and 7 Stereo for some background music, although if I were to do that today I'd use my SoundBridge via optical.

Gonk

Your explanation leaves me with more questions. I have a Pioneer Elite DV-59avi, which I suspect has better DACs than my 1070. I have it connected to the 1070's 5.1 analog connectors. Am I correct that I should be using Ext 7.1 and set the switch on the back to manage base below 80 Hz, sending that to the sub, and set the B&W CDM7 mains and my surround speakers for 80 Hz cross-over? (current surrounds are temporary, probably to be replaced with B&W CDM SNTs when I find the right used pair).

Thanks

The DV-59avi may very well have better DAC's, but I'd still suggest connecting via digital as well. First, the 1070 has a more sophisticated DSP section, so processing modes such as PLII/IIx are going to work best with a digital connection to the 1070 - potentially to the degree that it works better than the difference in DAC's, particularly if you are also going to use crossover points other than 80Hz to fine-tune your speaker/sub integration. When you do use the multichannel analog connection, I'd tend to recommend using the "HLF/LPF" setting and disabling any bass management in your player.