Yes, you have it exactly. The main function is a selector switch and signal level adjustment.
On impedances: the input impedance of the SEX amp is 100K (100,000 ohms). That's the load that any of your sources see. Sources will be happier the higher that impedance is, and each source will have a minimum load impedance, below which is does not perform well.
Seduction wants to see at least 50K, so it's happy.
CD probably wants to see at least 10K, so it's very happy.
Phone wants to see at least 10K, so it's very happy. If you are using the headphone output instead of line out, it would be happy with anything over 32 ohms (0.032K).
Everybody is happy, so your system should rock. All you need is a cheap switch. If you can't find one, we'll help you make one - this forum is very helpful!
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Now gain and volume is another confusion. I have a whole white paper on the subject here:
http://www.bottlehead.com/loosep/signals.htmAll the knob and potentiometer does is reduce the signal voltage. Notice that it does NOT set the output voltage! It only sets the ratio between output voltage and input voltage. It cannot be calibrated in volts, only in the ratio of voltages.
In a normal preamp, that reduced voltage is then amplified, usually by 3 to 5 times. The control is not linear, but somewhere in the top half of its range the potentiometer reduction is 1/3 to 1/5 of the incoming signal, so the output voltage is often the same as the input voltage. Without the amplifier after the potentiometer, the output is never more than the input.
If everyone followed a set of standard voltages at various points in a system, we could design around this and everything would work together. Unfortunately that's not the case. An iPhone has (I think) a peak output of 0.95 volt. A standard CD player has 2.0 volts, but some are more, up to 5 volts. I remember back when cassette tapes were still in use that some decks would put out 0.1 volt. To make matters worse, some components are rated for peak output, while others are rated for a kind of average, which in practice is about 1/5 of the peak voltage.
In most modern systems, every component has more gain than is needed, and the preamp (or integrated amp, like SEX) is used to reduce that gain to what works.
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Finally, I should say that some people do prefer the sound of a system with a preamp in it, even when there is no technical need for one. But this is a matter of subtle perceptions. There are various explanations that may or may not be relevant. In practice, you would likely hear a small difference, and might prefer one to the other. There is much discussion on the various forums about this. But I say again, it is subtle.