Well, I've had this unit for nearly 3 months now and after hemming and hawing about it I feel fairly qualified to respond. Of course, as always, YMMV (your mileage may vary).
1. Advanced bass management, particularly with multichannel (DVD-A/SACD). If you player doesn't have that feature, this is huge. Many receivers cannot do bass management in the analog realm.
2. Lots of good clean power and headroom, unless you're used to megawatt separates.
3. Very musical.
4. Multiple options for multi-room implementation. If you're only using 5.1, the rear surrounds channels can drive speakers in another room. Alternately, you could use the multi-room pre-outs with another amp, or H/K's proprietary inwall amp units and A-Bus technology for the ultimate in mod living. Comes with separate second-room remote.
5. Logic 7 DSP: Convincing and natural surround sound from 2-channel analog sources.
6. Attractive looks and styling.
7. Dolby Headphone: sounds gimmicky but I recently watched a movie with headphones (so as not to wake my twinfants) and it was truly an immersive experience.
8. Upgradeability through RS232 port. Remains to be seen whether this is a true strength but the PLIIx and "dropout" improvement update is rumored to be imminent.
9. Jacks on the front for game system or camcorder hookup (only a strength if you can use it).
10. Prices are plummeting now that 635 is almost out.
1. Well the biggest one, obviously, is the dropout problem extensively discussed in this thread: http://www.avsforum.com/avs-vb/showt...75#post4488975
Frankly, this has proven to be much more annoying than I thought it would be, particularly when watching digital cable or during the opening THX or Pro Logic flashscreen of a DVD. You can solve the TV issue by only using analog connections (Logic 7 is nearly indistinguishable from Pro Logic II on TV sources), but you'll end up explaining with embarassment to anyone watching a DVD with you why your expensive shiny new receiver drops the ball during the big sound-system "showoff" moment. I have not, however, experienced any dropouts during CD listening, as others have reported.
2. EZSet speaker level calibration feature is not very accurate.
3. Unit gets VERY hot if not given plenty of room to breathe.
4. Heavy and massive chassis may not fit in everyone's entertainment unit. Make sure it does before you buy.
5. Fewer digital ports (2 coax/2 optical on back, 1 more of each on front) than other receivers in its price class.
6. No video upconversion.