Took apart the lsi7's
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Joey,
One thing to remember about capacitors in the audio path, audio signals don't really pass through them. In other words, capacitors are not conductors, like speaker wire; or even semi-conductors, like a resistor or transistor. When an audio signal, originating from your CD player, for example, comes into the wire leading to any series capacitor that same audio signal doesn't come out the other side. A representation of it comes out the other side, but not the original. So the more perfectly the capacitor recreates the original audio signal the better things will sound; more like it's supposed to. Imagine you were sending Morse code, dots and dashes, spelling out, "Help, there's no beer!". This series of pulse of electricity could travel along a couple of wires and the guy on the other end receives the exact pattern of dots and dashes and knows you're getting thirsty. But suppose the liquor store is closed, but the guy knows you might send a message after hours. So, he rigs up a bunch of wet cell batteries and a series of switches that send the incoming messages to the storage batteries. Whenever a dot comes along it goes to a battery, a dash goes to the next battery, etc. So, a group of batteries are storing the incoming message and, in the morning, the liquor store owner comes in and has each battery release it's dot or dash in the proper sequence. Alls' well, he reads the message and knows you need a delivery of some cold beer. But suppose one of the batteries doesn't release it's dot or dash when its supposed to. Or, imagine the batteries release dashes slightly before the other batteries release the dots. The subtleties of your message might be blurred. He might read it as , "Help, there's a bear!" and you get two grumpy guys with guns instead of a cold one!
This is kind of what capacitors do, they tend to store some frequencies slightly longer than others, causing a smearing effect. Or they slightly exaggerate some frequencies more than others, adding colorations to the sound. But, what came in isn't what goes out, so it's distortion.
I hope this helps.
Take care, Ken