I called Yamaha tech support today, I got a quick response from a friendly tech, but alas he confirmed that my settings were correct and that any signal below 80hz should be redirected to the sub.

I'm sure not many people have dual svs-ultra's, and a velodyne sms-1 and six Klipsch RF-7's in there system so it would be hard for a tech over the phone to say it was the yamaha's fault. I sympathize with the fact that it would be hard for yamaha to fix my problem due to the fact that I am using a velodyne product to measure things, I guess the next step is to try a different receiver and see if that responds correctly to eliminate the sms-1 (although I'm pretty sure it's the yamaha). Other than getting a different receiver I don't see how I'm going to stop my mains from being at least in some part "full range" and anything I gain with the velodyne sms-1 will be negated when I have six RF-7's throwing bass all over the place.

You guys at outlaw must be pretty lucky, I don't know where to go with this problem, other than fix it myself by buying another new receiver, I do not want to stick my dealer with this one as I like the relationship I have with him now and don't want to strain it for such a small thing. But I do want it fixed, I didn't spend all this money just to be tripped at the finish line. I've been holding out on a pre-pro due to the fact that I've been buying tons of other stuff, and that they don't have quite the features I want yet (not that the rxv-757 did, it was just a temporary fix).

I think the yamaha has a problem with bass mangement but I don't expect them to admit it.
Time will tell I guess, and if I'm wrong I will have no problem admitting that. I'll try my best on this end to clear up any user error. Sadly what I thought would be easy is turning out not to be.