This is interesting, coz on my Denon (2310) this works as I described above. Nonethelss, AFAIK, turning off MultEQ will only turn off the channel frequency response eq'ing but the channel level and distance settings will remain intact. One thing in the Denon implementation I can think of is that it might not be a wise idea to let DynEQ apply the equal loudness curves to a channel that has not been eq'd to flat (or flatish). On the Onk it seems it's working that way and probably that's why a bigger difference can be heard with MultEQ off and DynEQ on/off.
My humble advise: don't turn on DynEQ without MultEQ!
You are correct. DynEQ cannot work properly on an un-EQd signal. It seems that the 8xx series Onkyos have a fault or bug in their FW which allows incorrect implementation by the user. On my 5509 it works as it should - ie if you turn Audyssey off, then DynEQ also switches off.
I asked Chris K. (Audyssey) about this ....
It's not an error. It's a decision made by Onkyo. We don't recommend doing that because the system will not be properly calibrated if you just turn on Dynamic EQ.
Likely worth a note in your FAQ ...
Thanks JD. I will include this info in the FAQ. Typical of an AVR manufacturer to insist on doing it wrong!
Anyone with these units would be well advised to run DynEQ the way it is intended to be run - with MultEQ engaged. Any other way of doing it will give 'unpredictable' results.