Well, for item number one I can comment in an indirect way: I felt that the 1068 and Outlaw Model 950 were pretty reasonably comparable sonically, although the 1068 had a few extra features (transcoding video to component, editable input names). In fact, my wife and I preferred out Outlaw 950 system (with Paradigm Reference speakers) to a co-worker's Rotel 1068 system (with B&W speakers). Considering the sonic improvements I found in the upgrade from 950 to 990, I would suspect that the 990 would win out over the 1068 sonically.

I only tend to recommend considering a 7.1 setup if the room accommodates it well. You want to have at least a few feet between your sitting position and the rear wall to make the extra speakers really worthwhile. If your sitting position is up against a wall, it's going to be difficult to get 7.1 to work well for you.