This is the normal way to use a HT bypass in a stereo preamp - most people will use a stereo preamp like this with an external stereo amplifier for stereo listening (along with a multi-channel AVR for the surround decoding and powering the rest of the speakers for multi-channel listening):
1. Connect all multi-channel digital inputs to the AVR (HDMI, coax, toslink, etc)
2. Connect all speakers EXCEPT L/R main directly to AVR
3. Connect AVR L/R main outputs (RCA preamp outputs) to stereo preamp HT bypass input
4. Connect all stereo analog inputs to the stereo preamp (CD player, DAC, etc)
5. Connect stereo preamp L/R outputs to stereo amplifier inputs and connect L/R main speakers to amp
When listening to analog stereo sources connected to the stereo preamp, only turn on the source, preamp and amplifier and use the volume control on the preamp. This is a minimal system with the cleanest possible signal without going through an AVR (which supposedly contains noisy digital electronics, tuner, etc sharing the preamp power supply). The goal is to use a high quality analog preamp to decrease the noise floor and a more powerful amplifier to increase power to the main speakers for stereo listening.
When listening to multi-channel digital sources connected to the AVR, turn on the source, preamp, amplifier, and the AVR. Engage the preamp HT bypass to pass signals unaltered through it (bypasses the volume control). Use your AVR as the control center to set channel levels and volume.
If your stereo preamp doesn't have a HT bypass, you can connect the AVR to one of the stereo preamp's analog inputs (say Tape 1) and set the stereo preamp's volume control to a known / repeatable location like 0dB so that your multi-channel balance is maintained between listening sessions. Just be careful to turn the volume back down before switching to any other input!
You asked if you could use the AVR's amplifiers instead of an external amp. Yes, if your AVR had preamp inputs, but that would defeat the whole point of using a "better" preamp. If the preamp section of the AVR was actually a problem (because it was low quality? or too noisy?), then sending your "better" preamp signals into the AVR would likely give identical results. This is why most don't believe this is going to change anything and are going to dismiss this entire post.
Many will argue there is no advantage. In my system switching from an AVR to much higher quality separates, all balanced connections and an amplifier with very low distortion I could hear a noticeably lower noise floor and more detail - not a "night and day" difference but I could hear it (yes, it was a sighted comparison and no DBT - so take it at face value).