Setup question

@reubent Thank you for the advice. I think I'm going to try that and see how it goes for a little while..It's not a big room anyway. A 7.1 or Atmos system would take up more room than the furniture so 2 channel might be the best way.

I do agree with reubent regarding cost/quality of multichannel systems over 2 channel ones. Also in the fact that the NAD likely has the better preamplifier stage. My advice was made based on your wishing to add analog to an existing system using gear you presently own. 

Regarding audio for video, my thinking is that unless one has a dedicated room for theater, the added expense of extra channels doesn't represent a worthwhile return. I believe this to be particularly true considering 7.1 over 5.1. In what environment is your video/audio used?  I use a 2.1 system for video/audio in my living room (video takes precedence here).  If I could purchase a quality 3.1 integrated amplifier I would consider this, for the center channel often proves beneficial for video with some discs. Don't know of said device, so would likely have to use 3 channels of a 5.1 processor which I am unwilling to do.

I would suggest you integrate your analog source into your system as is, then try using your system as a 2.1 and 3.1 channel one for video and see/hear that experience over the 5.1 experience you now have. Then get back to us regarding your thinking.

Is the fact that you have to use the digital out from the cable box vs. your TV that big of a deal?  Are you sure you are outputting PCM digital from your TV via the optical connection? 
  

@mesch The reason using optical from the cable box is a big deal is that I run Plex more than I ever watch cable..and the cable box doesn't have apps, or specifically the Plex app. I'll play around with different configurations. Dialogue in movies gets muddled for my at times and I often have to turn up the volume on the TV to hear it. I bought my Dad a soundbar that he retired in about 3 days so that's available for use as well. It's an LG with a wireless sub, nothing special.

As far as the PCM output is concerned, I'm fairly new to optical but I thought I had tried all output settings from both Xbox and TV. But now that I know PCM is the specific setting to use, I'll try again.

It's a pretty small room. Something like 14 x 14. The house is a small bungalow so HUGE sound isn't required, but it would be nice to have more clarity as well as sort of "feel" the action in those types of movies.

I agree that dialogue on movies can be lost with high impact movies. Use of a center channel speaker does improve this. A subwoofer does much toward experiencing the 'feel' of action.  One can always use a 5.1 amplifier for a 3.1 system. In your small room you might find that satisfactory. Would allow one to own better L & R speakers for audio.