For my thoughts, the whole point of using the AK120 is to decode high resolution digital music using the dual DAC.
The post DAC output signal should then remain in the analogue state, so you shoudn't really be using the optical out to connect to an AV receiver.
In short, it is a portable DAP in the main, a pass through external DAC.
I also have a preference for keeping AV and stereo systems separate. So I'd keep your AV as-is; so look to get a new stereo set up.
There could be some issue that the analogue out (headphone socket) might not be switchable to fixed line out, so the volume control on the AK120 might be driving a variable line out. So contradicting myself, you may indeed need to use the optical out and see if a digital amp like the new PM6005 is any use. Also see the TEAC 501 digital amp.
Get down to your local hi-fi retailer with your AK120, explain what you want to do, what you can afford to spend and see where it goes. Failing that, look at the What hi-fi best buys or 5 star reviews. I trust them (mostly)
Better still, wait for What Hi-fi to test the AK120.