Ok bigj, lets clarify.
You have 2 crossovers to deal with, the receiver's inline and the knob on your sub.
If you are going to use the receiver crossover, then turn the cross knob on the subwoofer all the way up to get it out of the way. Otherwise you have 2 crossovers working at the same (or even a different) point. This causes sonic issues that would be hard to figure out.
Easy summary:
Method One
1) Set mains to Large (this should turn off the receivers crossover setting, if not, do it with whatever manual option you have ...read your receiver manual for this info).
2) Turn knob on subwoofer to around 100Hz crossover. Listen to music.
Have someone turn down the knob slowly so you can hear the effect the changing crossover point has.
3) Adjust the crossover to the point at which the bass sounds best blend with your main speakers. It should not sound muddy, muffled or over bassy. If you turn the cross on the sub too low, the bass should get thin and weak. (For my M60s in my HT room, the cross of about 50-55Hz on the EP350 blends quite well.)
4) Once you have found the best sounding cross point, play with the sub volume or recalibrate all the speakers with Avia or something similar.
5) Test with music and movies and see what you think.
Second method (for those who have a receiver with variable crossover settings under 80Hz)
1) Set mains to Small (this should turn on the receivers crossover setting).
2) Turn knob on subwoofer all the way up. Set the crossover in the receiver to 40Hz to start. Listen to music/movies. Then try the 60Hz value you have. Listen to music/movies.
3) Pick the crossover point that you like best based on the earlier criteria from Method One. Bass should not sound muddy, muffled or over bassy, nor should it sound thin and weak.
4) Once you have found the best sounding cross point, play with the sub volume or recalibrate all the speakers with Avia or something similar.
5) Test with music and movies and see what you think.
The advantage of method one is that you have more control over the exact crossover point compared to the receiver's inline limited settings.
Many will state that you HAVE to set your mains to small regardless of whether they are floorstanding models or not and that you HAVE to use 80Hz as the crossover point. This may be the recommended method by an industry movie standard but it does not mean that movies and music will sound worse if you try other options.
I personally prefer the less dominant bass of the M60s especially for music, over the subwoofer's thumping character. For movies, the subwoofer kicks in where it is really needed, to rumble when i want to feel that explosion or avalanche.
This thread may also be of interest.
In regards to the watts, low frequency notes require more energy to produce especially with smaller drivers. That is why most subwoofers tend to use larger driver sizes and higher rated amps. When driving your main speakers through your receiver on the large setting (or even at small but with a lesser crossover) the smaller drivers on the main speakers require more power to deliver bass notes. Clipping may began at volume levels that did not happen previously when a higher crossover point was used.
Remember, these home receivers usually have one power source for all the many things inside it and all the speakers it drives. You would be amazed at how much cleaner a separate amp can drive your speakers at higher volumes (and i'm not just talking about >100dB either, but even in ranges much lower...anecdote withheld here).
