Is using a X.1 AV receiver just for stereo bad?

the answer, unsurprisingly, is it depends on the avr. i was very pleased using a b&k avr 202 and 307 for two channel stereo; i believe an arcam avr (e.g. the 305) would sound even better. correspondingly, my quite pricy denon avrs just don't hack it; likewise various marantz i've cycled through.
i agree that if you don't need hdmi and other such foolishness, there's some vg values in high-quality used avrs; purists will argue that separates ultimately sound better, but there's some real advantages (budgetary, convenience and otherwise) in your proposed approach.

Loomisjohnson: I am inclined to believe that integrated amps are likely to do better at each pricepoint than separates. If you can match pre-amp to amp, then there must be some sonic or $ improvements, if not both.

Still, if you take processing out of the picture, I have yet to encounter a class-d implementation that I am 100% confident I can differentiate between in a true blind AB.

I will see what B&K options I can rummage up. Thanks to the long term loan of the Rotel, I can put this off for another 6 months.

Zanon, most people believe that (all things being equal) for a host of engineering reasons separates will sound better than comparable integrated components, although of course a high-quality integrated will outperform suppar seperates. The ultimate question, as you infer, is whether the sonic differences are cost-effective. Now, I often see older Arcam and B&K AVRs on Agon and Ebay for as little as $200. These AVRs not gonna sound as good as a system consisting of used Arcam or B&K componenents and an external DAC, but they'll probably sound 80% as good for, say, 25% of the price. Whether the improvement in sound is worth the extra $$ is, of course, the dilemna we all must face.

Loomisjohnson: Do you know what kind of amps B&K and Arcam use? I'm guessing SS A/B in the amp stage, and who knows what in the pre-amp stage.

i'm not a techie, but looks like depending on model they use class a or a/b designs; b&k appears to use class d on some separate amps. the more i read, the more i'm impressed with their engineering--these mfrs. absolutely blow away the asian crap in terms of design and build quality.