Oppo BDP-95 with Arcam AVR350
Fortunately, the Oppo BDP-95 offers bass management, so you can do that in the player; simply designate your main speakers as "small" in the player's Speaker Conguration submenu, and the low frequencies will be redirected to the subwoofer output. It also provides speaker distance/delay and trim-level settings.
However, the Oppo offers no equalization, and the AVR350's multichannel input bypasses all internal processing (except volume), so the only way to equalize the system you have is with an outboard equalizer and enough training to configure it correctly. Buying such an equalizer and hiring a pro do set it up would cost a fair amount, so if you are thinking of doing this, you might consider getting a new AVR instead. As for lip sync, I don't think that will be a problem from the Oppo.
Should you have bought a newer AVR instead of fixing the Arcam? That's a tough one. The AVR350 undoubtedly sounds great, but it has only two video-only HDMI inputs and no lossless decoding. I probably would have opted to put the $400 toward a new AVR, though any model comparable to the Arcam would be much more than that.
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