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Hoo boy! I love AV receivers. Until they break. Then I love Walgreen's for a big bottle of Advil.
That said. If you can read a block diagram. The pre-out's stay active along with the main amps. The speakers are switcable but the main amps stay powered on. Typical of any receiver with pre-out jacks.
Preamp outs will be controllable with the main volume control.
In essence inviting you to use your own stack of external amplifiers and let the internal power amps set idle or run another room. Think of an actual movie theater with a rack of QSC amps running the speakers and not burdening the internal amps.

I would have to read the user manual. But any time "Direct" is an option I believe you can consider that the signal path goes straight through any post processing (before the main amp section). In the 2 channel stereo world if you can select something like "stereo direct" you will be bypassing the tone controls completely. Different from just setting the controls flat. The switching will jump-over the whole tone control/loudness module.

I got the service manual from Electrotanya surprisingly enough.
In AV receivers usually you will see that you have full control of individual speaker volumes.
But in Dolby, THX modes. Everything else you could normally do with a stereo receiver is "locked" to adhere to the specifications.
I do a few HT installs and consultations per year. Every manufacturer has their quirks of how you can manipulate settings. Things like DSP where you see a rock, movie, concert hall, etc. mode will let you do some tweaks. to the sound environment.
Like I mentioned. Dolby Digital and THX modes will usually default to licensing specifications. And that be that!
But. With external amplifiers you may have to option of using an equalizer before the input.
What comes out of the preamp jacks is "pure". What you do after them is your baby.

Getting familiar with how every setting effects the receiver's function can be a bear to grasp. I guess I would suggest you play around with what you can do in the DSD section with Digital Audio Converter Direct on/off.
You'll probably find what I mentioned is true. Settings you had with it off will become unavailable once Direct (or "bypass all of that crap") is switched on. And have a pencil and ring binder handy.
I usually leave a cheat-sheet with my customers to guide them through at least turning on and selecting inputs IF HDMI doesn't do it for them. HDMI-CEC can be a royal pita. Some devices seem to want to hijack the TV or receiver. I got a call that a satellite receiver kept switching a Denon AVR to that input when the owner wanted to watch a FireTV. Once again. Pop through the menus and see if this-or-that setting makes it play nice.

I saw your post sat stagnant for a bit. I just wanted to share a few thing that I find here and there.
Maybe a member with an actual Onkyo can assist.

"Direct" mode cuts out all of the Digital Signal Processing (including room correction?) that might otherwise be in play. Don't worry about it too much unless you're listening to hi-res stereo content and you can't bring yourself to turn off surround modes.

DSD is a lossless digital audio format that you're probably not going to run across unless you subscribe to a fancy audio service that allows audiophile class (stupid expensive) downloads or have a library of Super Audio Compact Discs (SACD).


There is nothing audio-wise going on inside the AVR that is in the analog domain. All analog inputs are routed directly to an Analog to Digital Converter (ADC) and all analog outputs are only an amplifier section away from the included Burr-Brown Digital to Analog Converters (DACs)