Yes, I think that the sound quality of the NAD is definitely going to be much better than the Yamaha. My experience with Yamaha amps has left me unimpressed, to say the least.

For the Phono Preamp, I suggest the Pro-Ject MM Phono Box, which is $99 at various places including Needle Doctor.

Another one to consider, if you can get it, is the Music Hall A15.3 Integrated amplifier, which is excellent and has its own phono preamp built in. The Canadian distributor is Plurison in Quebec (phone 866-271-5689).

In addition to gain, the main function of a phono preamp is RIAA Equalization. The soundtrack on a vinyl record is not playable without going through RIAA Equalization because the bass on the record is severely reduced and the treble boosted way up in the mastering of the record.

Read RIAA Equalization at Wikipedia for an understanding of the record production process.