Thanks for the input. I'm warming to your position, but I'm not quite there yet
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The cost goal is going to be difficult to meet. XLR connectors alone can cost $5 each. My estimate is 95% of the customers for this device wouldn't use any XLR inputs (feel free to make a better estimate). That means the system would cost at least an extra $25 for something that wouldn't add any value to 95% of the customers. On the other hand, an XLR for a calibration mic could possibly add value to 95% of the customers.
On the bright side is the flexibility of the Firewire architecture of this proposed system. I consider it the true professional audio interface. If a high end customer saw value in implementing a balanced input to the system he could attach another device like a M-Audio Solo or Miglia HA02 ($120 or less). These devices could digitize the balanced signals in a very high quality manner and pass them to the bass management device. I think the Miglia even does the soft clipping you were interested in. If this really turned out to be a popular option for the system, we could develop simple lower cost devices to perform this same function. The Miglia and M-Audio devices include many other functions.
A customer could presumably gang as many of these devices as necessary to satisfy all his input requirements. The memory in the main system would select the appropriate input for each setup. In my future dream world, all the source devices are providing digital streams over Firewire and no converters are necessary until the amplifier.
All this flexibility comes nearly free with this system architecture. The main unit stays as low cost as possible with 2 unbalanced inputs that add value for 99% of the customers. Even most of the XLR users will likely have an unbalanced device they want to hook up.
I'm still open to the probability I'm missing something. Please feel free to correct any of my assumptions. I appreciate you sharing your experience and I'm willing to adjust to compelling arguments.
Is this really the only issue you find on the list of requirements? I can't imagine it's so close to ideal on the first pass! Would you like to discuss DSP options?
Barry