recruit said:
If you want good 2 channel then you might need to invest in a good 2 channel amplifier to power your speakers as trying to get great HiFi out of an AVR is not going to happen unless you are looking at the higher end models.
This time last year I would have agreed with you: stereo in / stereo out right? I was very much in the 'pure direct' / no tone camp. I purchased a mid-range receiver & speakers (see signature) for surround with the intention of purchasing a Naim Unitilite or similar for stereo duties.
However the AVR was so good at stereo I ditched the Unitilite plan. It did take some patient tweaking to get it right though & coming from the 'pure direct' camp, I found some of the best results to be counter-intuitive. AV receivers are extremely complex pieces of kit and there's far more to get wrong with them than a typical stereo amp.
For stereo sources I find the best results using the 'Extended Stereo' setting, then altering the balance in favour of the front speakers. This setting is not Dolby ProLogic which sounds muddy and generally pants to my ears. In my system the Extended Stereo setting sounds really awesome, so if the our OP friend's ears are being so badly insulted, particularly when his system sounds excellent playing blurays, then there's a serious fault with the set-up somewhere.
Not getting the settings right, just like speaker placement &'toe-in, can make an excellent system sound terrible, but it's certainly possible to get decent stereo sound from an AVR.