Hi.
First, I should mention that I've only tested the use of multi-zone operation using the ZONE 2 RCA output jacks on the rear of the VSX-1021-K, and not extensively.
Having said that, to answer your questions:
CraigM wrote:Would I be better off using zone 2 on the VSX-1021-K for the bathroom?
That kind of depends on your preference and future plans. You could take the ZONE 2 RCA outputs from the VSX and wire them to an input on the old receiver in your bathroom. This may give you more playback source options (TV, old tape deck, etc). If you'd planned on doing this kind of wiring to begin with, it might be a better option since you can control it with Indigo (though controlling the old receiver in the bathroom would still be a different story). If you didn't want to do as much wiring, the AirPort Express option would be the way to go. In my situation, I don't use Zone 2 on my VSX. I just use 4 AirPort Expresses in 4 different rooms and send audio from the Mac (or my various iOS devices) to those. Since I don't listen to the radio, CDs, or TV in other rooms generally, this isn't a limitation, but it might be for you if you do.
CraigM wrote:- What are the rules of what can be played through zone 1, zone 2, and 1 & 2 at the same time?
With Zone 1, there are no input source limitations. With Zone 2, the only limitation I know of is that you can't pipe audio from any HDMI input to Zone 2. The analog and S/PDIF inputs can be sent to Zone 2. Both Zones 1 and 2 can be using the same input at the same time too.
CraigM wrote:- Scenarios I can imagine:
* Zone 2 is programmed to power on the VSX-1021-K, but it may already be on from zone 1 use.
* Zone 2 is programmed to power off the VSX-1021-K, but that would kill zone 1 if in use.
Zone 1 and 2 can be turned on and off completely separately. Zone 2 can be turned on even if main power for zone 1 is off. When the VSX is setup to power Zone 2 speakers, it'll turn the amp on whenever Zone 2 is turned on, even if Zone 1 isn't. Basically, you can control the two Zones' power independently and turning on or off one won't affect the other.
The Pioneer Receiver plugin supports separate status information and controls for both zones as well, so you'll be able to control the 2 zones separately within Indigo.