>>>What exactly would be the result of "harmonic distortion on the AC waveform"?<<<

Any alteration of the waveform (distortion) is highly undesirable in a sound and video system, especially that introduced by the very equipment that is supposed to "clean up" the waveform. Industrial equipment and computers are nowhere near as sensitive to this type of thing as are video components and audio amplifiers, preamps etc.

I would keep a transformer such as this at least 25 feet away from any audio or video equipment.

Free or not, this Sola unit is not suitable for home theater use. It has very valid uses in other areas, but not here.

The TrippLite "Isobar" units afford just as much surge and EMI/RFI protection as the Sola transformer does. The Sola just regulates the voltage, which is not really necessary in a home application unless you have really bad power. If you do, then there are other regeneration options that are far better than ferroresonant transformers.