harshness- Everyone will have their own cup of tea when considering a higher end HT installation than a low end HT in a box system.
In the case of DACs and other special considerations, what Diogen said is basic to his opinion. However, he may not understand all reasoning in all installation compromises. I may not be typical but I know I am what I am and I can't do a complete HT system in one shot design. Instead, I am constantly tweaking and when it comes to the high end of the scale with power and sound, I am not ready financially to make a complete system upgrade every time a new format hits the industry. So, I have to make upgrades as I can afford them. To upgrade to 7.1, I wanted a really good analog connection to simple (diogen's term "Dumb" amps) that were high power and capable of loud without falling apart at the high end. In my case, the processing in the OPPO was a way to get that higher end quality for 7.1 but not have to upgrade the AVR equally at the same time. In my case the heftier power supply was what made me go for the SE more than the DACs but having both, I'm sure also made a big difference. I have three BD players, the Samsung 1500, the PS3 and now the OPPO 83SE. There is a big difference between the OPPO and the other two in the sound quality that is only heard on DTS HD Master audio. The sound appears to he greater dynamic range and fullness. But when I use the other players, or VIP 722K play sources, I'm feeding the AVR with Optical audio, then speakers and amps are identical. MY next upgrade will be to swap out my 10 year old AVR to a 9.2 AVR with all the latest bells and whistles. I don't plan to buy price, but save until I can afford a very high end AVR. At that time I will re-examine the best connections for the OPPO, HDMI or analog.
The key to the way I think of systems is what works for me and remaining flexible.
As far as Picture and functionality, there is no difference between the BD-83 and the SE. Both offer the same best in the industry performance, comparable or better than the PS3. You only gain dynamic range and quality of sound in the SE if you are connected analog out to simple amps or AVR is "dumb" pass through mode. If your AVR further processes the sound and you bought the SE, you wasted your money!
Diogen believes the best candidate to house the high end DACs is the AVR. I agree with this, however, considering at this time the only 7.1 DTS Master Audio source is the Blu Ray disk, having those DACs in a higher end DVR would cost me today far more money and I would get no added program source benefit. If I had DTS Master audio in 7.1 from my VIP 722K and my xbox 360 and PS3, then having the DACs in the AVR would make more sense to me.