Klh dvc-2500 How can I lower the volume? Setting "1" is too loud. Is there some aftermarket gizmo I can wire into the speaker wires?

Your problem is VERY common. It's defective, get a replacement.

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2.0 out of 5 stars Not bad for price $70+$30 S&H, October 20, 2003 By A Customer
This review is from: KLH DVZ-2500 DVD Home Theater System (Electronics) I read alot of the recent reviews before purchasing this system. I wasn't going to buy it because of the volume problem (too loud) but some people said that this could be lowered in the 'audio properties > dynamics' setting.
Sure enough, there is a setting, but it does NOT lower the volume level at all. So, I rang the toll free 888 number and this audio level problem is a defect. However, the dynamic setting is purely to make some sounds softer, not to lower volume. I was told to get a replacement. The replacement is the exact same way ... defective. Buy this system if you only want to hear _DVDs_ with all speakers, because there are no inputs. And the radio, CD is at best stereo,
AND
if you don't mind the fact that it will be too loud, if at any stage you want a normal listening level. I gave 2 stars because I was able to watch a DVD ok with volume level one.