For anyone still following my journey.....Here is an update.
I did get the Amazon.com linked toslink switch and analog audio to toslink ADC adapter linked above. However, the ADC adapter does not have any level adjustment and what appears to be limited dynamic range. So it was difficult to get the output gain from the preouts of my AVR dialin so that I could get a good low noise low hiss output out of the ADC.
I went ahead and purchased the Focusrite Scarlett 6i6 USB device. The Scarlett has line/instrument adjustment as well as 50db of gain knob adjustment on input 1 and 2. So far I have been testing but it looks like I will be more successful with the Scarlett. I got this helpful email from Focusrite support:
Thank you for your email.
Let me walk you through the steps I would take to set this up properly.
First off I would always begin by getting the Output stage working, meaning connecting the Scarlett's rear Monitor Outputs to your Parasound HCA-1000A and getting your basic iTunes running cleanly.
This is an area where gain staging of the knobs will matter, though this is not recorded to the track, it is important to quality listening.
First connect your Red/White RCA Leads from the Scarlett's Outputs, keeping 1 Left and 2 Right, to the Parasound R/L Inputs at set the switch here to Stereo.
You can try calibrating things by first turning the volume on the Parasound all the way down, then setting the Monitor Knob on the Scarlett around 75%, leaving some headroom.
Play some basic audio such as iTunes, and turn up the speakers to a strong listening volume, balancing both knobs on the rear of the Parasound. Then you can adjust further during listening using the Scarlett's Monitor Knob.
Next to get the inputs set up being with the Gain Knobs down and switches set to Line.
Plug the Pre-Out Front of the Onyko TX-SR707 AVR to the Scarlett's Inputs, keep Left in Input 1 of the Scarlett and Right in Input 2.
Play some basic audio such as your Receivers radio, or other Input and look for signal on the Scarlett's Halos.
Slowly raise both Gain Knobs until you have a solid green halo, with no red clipping.
Unity Gain for a balanced signal is around half way up, or 12 o'clock so I would expect with an unbalanced receiver Pre-Out you might need to go up further than this, such as to 3 o'clock, but it will also depend on the level of the Input going to the receiver. For example a modern loud TV show from HDMI could be much louder than a feed coming from a turntable with some older music that would not be mastered as hot.
In Focusrite Control you would want to then choose the best routing for your needs.
If you wish to monitor through the DAW, so you only hear what is recorded, try File > Routing Presets > System Playback.
If you want to hear the Live Inputs via Focusrite Control, hearing the signal before it goes to the DAW, try File > Routing Presets > 2 Channel Analog.
Then in your DAW set up your Stereo Track to record Input 1/2.
Keep in mind to never use a Microphone with the output Pre-Amp, the Parasound, turned up, as this could lead to a nasty feedback loop.
Please let me know how you come along.
If this doesn't solve your issues, please let us know so that we can help you further.
Best Regards,
Focusrite Technical Support