Update: factory reset no result.
Lowering volumes digitally (through software) changes nothing. I get the same terrible distortion but lower volumes.
I will start the test protocols now but i think its an analog problem on the hardware.
I have an MR816 and had a similar problem - it turned out to be 27KΩ smd resistors on the front and
back of the main board in the area of the gain pots, the op-amps immediately following. It’s easy to see with a magnifier if they’re burnt but replace them anyway.
Ch1 & Ch2 the IC to look for is just behind Ch2 combo input socket, it’s IC602, replace resistors R747 &R748 - these are the feedback resistors for IC602 which may also be faulty. I replaced all 4 IC’s immediately following the gain pots and the smd feedback resistors all of which were cooked.
You need to get at the underside of the board next - you’ll need to remove all the screws holding down the DM board, take off the front plate, remove the 8 pot nuts and front combo connector clamps, the two front panel ribbon cables, the insert connector and two power supply cables - leave the rest connected.
On the underside of the board in between each pair of pots 3-4, 5-6, & 7-8 is a set of 4 rows of smd resistors and capacitors for each pair of pots - the resistor numbers are all in little boxes adjacent to their location. Replace R755 R756, R1041 R1042, R1043 R1044 - I just tacked little metal film resistors to the parallel smd capacitors. Their associated IC’s are directly above on the top of the board - these are IC’s 603, 650 & 651 - NJM2068