AVR v. Preamp

[Pycroft]

Question for you all that know higher end gear. I recently purchased a Parasound Amp and Preamp. I bought them together, but really only thought I needed the Amp. The gear is : Parasound HCA 806 amp and Parasound P/SP 1500 THX preamp. Here is my current gear:

AVR: HK AVR 354
Speakers: Center: Polk Audio CS400, Fronts: RTA 11TL's, Surrounds: Monitor 30's, Sub: Def. Tech Prosub800.
Amp: Parasound (See Above).

The question is, how could/should I use the preamp? Is a preamp, within a home theatre setup, take the place of an AVR, or is it used with the AVR somehow? I was told that this pre would outdo the AVR because its only function is sound, whereas an AVR is an amp, pre, and tuner. If this is true, it doesn't do HDMI, or decode the latest codecs. Would it really sound better? If I shouldn't, how else could I use this? I currently have a decent 2 channel setup with a B&K amp, Polk Audio Monitor 7c's, adn a Technics Preamp. Could I use it in this setup instead of the technics? It's a 5 channel pre (I believe), so not sure if it's strictly for HT use. Thanks,

Pycroft